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LIBRARY 

OF  THE 

University  of  California. 

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Complete  Proceedings 

OF  THE  FIRST 

National  Business  Congress 

A  Free  and  Open  National  Forum  of 

Indostrial  Commercial  and  Finaocial  Interests 

UNDER    THE    AUSPICES    OF 

The  National  Bosiness  Leagoe  of  America 


GOLD  ROOM,  CONGRESS  HOTEL,  CHICAGO 
December  Kleventh,  Twelfth  and  Thirteenth 
Nineteen     Hundred     and     Eleven 


-f^°' 


ISSUED    BY 

THE   NATIONAL   BUSINESS    LEAGUE   OF  AMERICA 

Chicago    Stock    Exchange    Building 
CHICAGO,  U.  S.  A.,  191^2 


PRESS    OF 

STROMBERG,  ALLEN   &  CO. 

CHICAGO 


.^t 
^^%\ 


FOREWORD 


THE  National  Business  Congress  was  called  by 
the  National  Business  League  of  America,  as  the 
result  of  a  conference  of  leading  national  and 
local  industrial  and  commercial  organizations,  for  the 
free  and  open  discussion  of  questions  of  vital  im- 
portance to  business  interests,  for  the  purpose  of 
ultimately  finding  a  common  ground  upon  which  to 
insure  a  unity  of  action  in  the  promotion  of  such 
reasonable  and  sane  legislation  as  would,  in  the  judg- 
ment of  practical  men,  be  beneficial  to  the  industries, 
commerce  and  finance  of  the  United  States. 

There  was  no  intention  of  organizing  another 
political  party.  Already  there  are  too  many  such  in 
existence  for  the  general  welfare.  It  was  the  special 
aim  of  the  Congress,  however,  to  encourage  business 
men  everywhere  to  become  active  in  political  fields, 
but,  as  already  indicated,  only  for  the  purpose  of 
securing  wise  enactments  for  the  public  good;  for 
the  repeal  or  amendment  of  harmful,  inadequate  and 
unnecessary  laws, and  for  the  prevention  of  premature 
and  ill-advised  legislation  generally. 

The  Congress  adjourned  after  empowering  the 
Chairman  to  appoint  a  Resolutions  Committee  to 
consider  the  proceedings  of  the  different  sessions,  and 
to  draft  a  platform  covering  the  various  measures 
considered;  the  same  to  be  submitted  for  the  approval 
of  the  organizations  represented,  and  of  other  active 
bodies  throughout  the  country. 

228790 


INDEX  TO   ADDRESSES 

OPENING  ADDRESS. 

(.iEOKGK  W.  Shkldon,  President  of  the  National  Business 

Lea},'^ue  of  America 5-      8 

TARIFF,  TRUSTS  AND  POLITICS. 

Alexander  H.  Revell  of  Illinois 9  -    22 

THE  NECESSITY  FOR  THE  BUSINESS  MAN  IN   POLITICS. 

Henry  M.  Wallis  of  Wisconsin,  Chairman  of  the  State 

Lesrislation  Committee  of   the   National   Implement 

and  Vehicle  Association 23  -    33 

HOW  TO  GET  A  MERCHANT   MARINE. 

Bkx.iamix  J.  Rosenthal  of  Illinois 34  -    52 

THE  AMERICAN  CONSULAR  SERVICE. 

Dr.  Samuel  MacClintock  of  Illinois 55  -    73 

THE  RELATION  OF  INDUSTRIAL  ABUSES  TO  OUR  FOR- 
EIGN AND  DOMESTIC  TRADE. 

John   Kirbv,  Jr..  of   Ohio,  President   of   the   National 

Association  of  Manufacturers 75  -    93 

COMPULSORY  INSURANCE. 

Frederick  Towxsend  M.vrtin  of  New  York 93  -  105 

AMENDMENT  OF  THE  SHERMAN  ANTI-TRUST  LAW.  TO 
PROTECT  LEGITIMATE  COMBINATIONS  OF  LABOR 
AND  CAPITAL. 

Honorable  Frank  D.  Pavey  of  New  York 112-140 

TRANSPORTATION. 

Frederic  A.  Delano,  President  of  the   Wabash   Rail- 
road Companj" 155  -  165 

OUR  REFORMED  CONSULAR  SERVICE  AS  AN  AGENCY  IN 
AMERICAN  TRADE  EXPANSION. 

Honorable  John  Ball  Osborne,  Chief  of  the  Bureau 
of  Trade  Relations,  Representing  the  Department  of 

Slate  at  Washing-ton 166  -  188 

ELASTIC  CURRENCY  FOR  THE  PEOPLE,  STABLE,  FLEX- 
IBLE, RECONVERTIBLE. 

E.   Clarexce    Jones  of    New   York,  President   of   the 

American  Embassy  Association 190  -  211 

THE  AMERICAN  MERCHANT  MARINE  IN  OUR  FOREIGN 
TRADE. 

Robert  Dollar   of  California 218  -  220 

THE  PACKING  INTERESTS. 

Jacob  C.  Dold  of  New  York 250-255 

THE   CONSULAR  SITUATION. 

Austin  A.  Burnham,  General  Secretary  of  the  National 

Business  League  of  America 256  -  266 

MEASURES  FOR  THE  PROMOTION  OF  THE  AMERICAN 
MERCHANT  MARINE. 

Professor  Emory  R.  Johnson    of  the  University   of 

Pennsylvania 268  -  280 

PRESSING  NEEDS  FOR  CURRENCY  LEGISLATION. 

George  M.  Reynolds,  President  of  the  Continental  and 

Commercial  National  Bank  of  Chicago 280  -  300 

THE  RESTORATION  OF  OUR  COMMERCIAL  FLAG  TO 
THE    HIGH    SEAS. 

James     L.    Ewell    of    New    York,    Secretary    of    the 

National  Merchant  Marine  Association 301  -  315 

HOW  TO   INCREASE  OUR  EXPORTS. 

Benjamin  J.  Rosenthal  of  Illinois 316  -  324 


National  Business  Congress 

FIRST  SESSION. 

Chicago,  Monday,  December    11,  1911. 
10:30  o'clock  A.  M. 


The  Congress  was  called  to  order  by  Mr.  George  W.  Sheldon, 
President  of  the  National  Business  League  of  America. 

President  Sheldon  :  Gentlemen,  this  is  a  congress  of  busi- 
ness men,  called  by  the  National  Business  League  of  America,  con- 
sistent with  its  constitution  and  activities,  to  discuss  important 
national  matters  which  it  beheves  are  vital  to  the  welfare  of  the 
country;  to  deduce  from  the  discussions,  theories  and  principles 
which  will  result  in  the  adoption  of  resolutions  directed,  if  you 
please,  to  our  legislators,  with  such  recommendations  and  addenda 
as  are  deemed  necessary  for  the  proper  laying  before  our  legislative 
bodies  the  conclusions  reached  by  this  Congress. 

Attending  this  Congress  are  men  from  nearly  every  state  in  the 
Union,  and,  so  far  as  I  know,  not  a  single  man  who  has  any  political 
strings  attached  to  him,  and  is,  therefore,  free  to  voice  his  opinions 
in  the  most  effective  way,  and  I  think  I  may  safely  add  in  as  em- 
phatic manner  as  he  shall  feel  the  subject  warrants. 

I  remarked  that  the  subjects  for  discussion  are  vital  to  the  wel- 
fare of  tlie  country — they  are : 

Tariff,  trusts  and  politics. 

Measures  for  the  creation  of  an  American  Merchant  Marine 
and  restoration  of  our  Commercial  Flag  to  the  High  Seas. 

The  necessity  for  business  men  in  politics. 

The  American  Consular  Service. 

The  relation  of  industrial  abuses  to  our  foreign  and  domestic 
trade. 

State  Insurance. 


6  NATIONAL     BUSINESS     CONGRESS 

Anicndment  of  the  Sherman  Anti-Trust  law  to  protect  legiti- 
mate relations  of  labor  and  capital. 

Transportation. 

Promotion  of  American  foreign  commerce. 

Elastic  currency  for  the  people — stable,  flexible,  re-converti- 
ble. 

Pressing  needs  for  currency  legislation. 

How  to  increase  our  exports. 

1  think  you  will  all  agree  with  me  that  when  I  said  the  subjects 
for  discussion  are  vital  to  the  welfare  of  our  country,  I  was  not  far 
wrong.  If  we  admit  that  these  are  all  subjects  which  are  vital,  we 
have  agreed  on  the  initial  efforts  of  this  Congress.  Every  man  in 
this  room  is  sufficiently  familiar  with  all  these  subjects  so  that  he 
has  opinions  thereon,  and  I  venture  to  say  that  the  crudest  of  these 
•views,  if  enacted  into  \a.\x,  would  be  better  than  most  laws  which 
now  burden  our  statute  books  in  relation  thereto. 

Your  work,  therefore,  for  the  next  three  days,  is  cut  out  for 
you,  and  on  you  depends  the  impression  which  you  will  make  upon 
the  country  and  our  legislators.  Personally,  I  feel  that  the  result 
of  this  Congress  will  be  greater  and  more  beneficial  to  our  country 
than  any  congress  of  business  men  that  has  ever  been  held. 

There  are  two  subjects  in  the  list  in  which  I  am  particularly 
interested :  they  are  Consular  Reform  and  Merchant  Marine.  I  say 
that  I  am  particularly  interested  in  these  subjects,  and  I  am  further 
frank  to  say  that  my  interest  in  these  subjects  is  both  selfish  and 
patriotic.  Selfish,  because  I  come  in  daily  contact  with  both  in  the 
earning  of  my  daily  bread ;  patriotic,  because  I  am  an  American  born 
citizen,  and  I  see  abuses  in  the  first  which  are  easy  of  reformation, 
if  our  legislators  will  abandon  their  personal  and  political  interests 
and  work  for  the  interests  of  the  country  at  large,  which  they 
pledged  themselves  to  do  in  their  solicitation  for  votes  which  elected 
them  to  the  offices  which  they  now  hold,  and  patriotic  because  I  see 
hundreds  of  millions  of  dollars  per  annum  paid  to  foreign  countries 
to  provide  transportation  for  the  carrying  to  all  parts  of  the  world 
of  the  raw  and  manufactured  products  of  this  great  country.  But 
both  of  these  subjects  are  to  be  discussed  during  this  Congress  by 
men  who  are  much  more  competent  to  lay  the  facts  and  the  situation 
before  you  than  I  am  able  to  do.  You  will  hear  but  little  from  me 
during  this  Congress,  because  of  the  fact  that  it  was  instituted  for 
the  purpose  of  the  promulgation  of  the  ideas  of  you  captains  of  in- 


NATIONAL     BUSINESS     CONGRESS 


dustry,  commerce  and  finance  from  different  parts  of  the  country. 
It  is  my  intent,  however,  to  mingle  with  yon  for  the  purpose  of  col- 
laboration with  a  view  to  bring  about  better  administrative  condi- 
tions than  exist  at  the  present  time. 

Just  one  more  word  about  Consular  Reform :  The  files  of  the 
National  Business  League  of  America  are  full  of  autograph  letters 
of  prominent  Senators  and  Congressmen  who  have  eulogized  our 
efforts,  who  have  promised  heartiest  support,  and  who  have  not 
even  turned  their  heads  once  to  make  good.  These  are  no  idle 
^vords — they  are  facts  which  can  be  proven  by  our  records,  which 
are  open  to  each  and  all  of  you. 

I  recall  an  incident  of  some  three  years  ago,  when  a  committee, 
made  up  from  the  membership  of  the  Chicago  Association  of  Com- 
merce and  the  National  Business  League  of  America,  visited  Wash- 
ington to  urge  upon  the  Congress  their  support  to  the  proposition 
for  a  Tariff'  Commission.  This  committee  called  upon  the  Speaker 
of  the  House,  and  were  very  thoroughly  disciplined  by  him  and  were 
practically  advised  that  they  were  interfering  with  a  matter  which 
they  knew  nothing  about,  and  that  the  Speaker  and  the  Congress 
were  quite  competent  to  look  after  the  tariff'  affairs  of  this  country. 
The  morning  after  this  very  unsatisfactory  visit,  the  committee 
called  upon  President  Roosevelt.  He  listened  patiently  and  inter- 
estedly to  the  story  which  the  committee  had  to  relate.  The  com- 
mittee urged  upon  the  President  to  send  a  message  to  the  Congress 
recommending  enactment  of  a  law  providing  for  a  Tariff  Commis- 
sion. The  President  answered:  "You  all  know  the  fate  of  the 
various  messages  which  I  have  sent  to  the  Congress  during  recent 
weeks.  Were  I  to  send  a  message  to  the  Congress  recommending 
the  enactment  of  a  law  providing  for  a  Tariff  Commission,  it  would 
suft'er  the  same  fate  as  have  other  messages  which  I  have  sent  to  the 
Congress;  but."  he  said,  "when  you  get  home  remember  that  there 
is  an  election  coming."  Now,  there  is  not  a  subject  to  be  discussed 
by  this  Congress  but  that  involves  a  measure  which  is  for,  and  if 
enacted  into  law,  will  be  for  the  well-being  of  the  country.  If 
these  measures  are  turned  down  by  our  legislators,  remember  there 
is  an  election  coming,  and  see  to  it  that  those  legislators  to  whom  we 
shall  appeal  in  vain  are  retired  to  the  shades  of  private  life. 

During  the  last  fifteen  years,  however,  much  has  been  accom- 
plished by  the  business  organizations  represented  in  this  Congress. 
The  creation  of  a  Department  of  Commerce  and  Labor ;  the  progress 


8  NATIONAL     BUSINESS     CONGRESS 

in  consular  reform  and  in  the  movement  for  a  permanent  Non-parti- 
san Tariff  Commission;  Purchase  of  American  Embassy  and  consu- 
lar sites  and  buildings ;  a  national  irrigation  law  that  is  rapidly  trans- 
forming the  desert  wastes  west  of  the  Mississippi  into  a  vast  empire 
of  agriculture  and  home  builders;  and  to  crown  our  efforts  with  im- 
perishable credit,  the  Panama  Canal,  soon  to  be  a  great  commercial 
highway  for  America  and  all  the  nations  of  the  earth.  These 
achievements  demonstrate  what  business  men  and  business  organi- 
zations in  politics  can  do  when  they  all  pull  together.  The  results 
indicate  what  may  be  accomplished  in  the  future,  if.  through  confer- 
ence and  co-operation,  we  persist  for  the  enactment  of  wise  laws 
and  for  the  defeat  of  bad  and  unnecessary  measures. 

Gentlemen,  one  word  as  to  organization.  If  you  feel  that  you 
would  like  to  have  an  organization  Chairman,  Secretary,  etc.,  we 
shall  be  very  glad  to  have  you  organize  in  that  way.  What  are  your 
views  on  that  subject? 

Mr.  W.  H.  Stackhouse  (of  Springfield,  Ohio)  :     I  move  that 
Mr.  Sheldon  be  named  as  the  presiding  officer  of  this  convention. 
(The  motion  w-as  duly  seconded  and  unanimously  carried.) 

Mr.  Williams:  Mr.  Chairman,  I  move  you  that  the  present 
Secretary,  Mr.  Austin  A.  Burnham,  act  as  the  Secretary  of  this 
Congress. 

(The  motion  was  duly  seconded  and  unanimously  carried.) 

The  Chairman  :  The  remainder  of  the  organization  will 
come  to  you  from  time  to  time  in  the  way  of  committees;  such 
committees  as  you  would  like  to  have  appointed,  and  you  will  then 
have  an  opportunity  of  selecting  the  men  that  you  believe  to  be  most 
desirable  for  those  committees. 

The  Chairman  here  introduced  Mr.  E.  Allen  Frost,  General 
Counsel  of  the  National  Business  League  of  America,  who  warmly 
w-elcomed  the  speakers  and  delegates.  Mr.  Frost  then  presented 
statistics  showing  the  remarkable  increase  of  manufactures  and  cor- 
responding facilities  for  manufacture,  in  the  United  States,  and 
emphasized  the  pressing  demand  for  larger  foreign  markets  for  sur- 
plus American  products ;  mentioning  the  principal  agencies  that  must 
be  employed  to  increase  our  foreign  trade,  particularly  specifying 
improved  transportation  facilities  by  land  and  sea.  expert  salesman- 
ship, an  elastic  currency,  and  a  thoroughly  efficient  foreign  service. 


NATIONAL     BUSINESS     CONGRESS  9 

Mr.  Frost  also  deprecated  ill-advised  and  ill-considered  legisla- 
tion that  would  hamper  business  interests  and  clog  the  natural  chan- 
nels of  commerce.  In  conclusion,  the  speaker  expressed  the  hope 
that  at  the  termination  of  the  Congress  the  delegates  would  be  able 
to  formulate  the  needs  of  business  interests  in  such  a  clear  and 
forceful  way,  in  proper  resolutions,  that  they  will  go  a  long  way  in 
securing  from  the  Congress  at  Washington  such  legislative  action  as 
the  country  requires  and  demands,  to  insure  an  even  prosperity  and 
further  enhance  the  international  prestige  of  America. 

The  Chairman:  We  have  with  us  today,  gentlemen,  a  Chi- 
cagoan ;  a  thorough  Chicagoan.  Although  he  may  not  have  taken 
part  in  the  official  work  or  the  Governorship  of  the  cit}|.  he  has 
always  been  very  intensely  interested  in  not  only  municipal,  but  in 
State  and  National  affairs.  He  is  a  man  who,  "while  his  com- 
panions slept,  was  toiling  upward  in  the  night."  He  has  scaled  the 
ladder  of  industrial  and  commercial  advancement,  until  today  he  is 
at  the  head  of  one  of  the  largest  manufacturing  and  mercantile  con- 
cerns of  the  kind  in  the  West.  It  is  my  pleasure  to  introduce  Mr. 
Alexander  H.  Revell. 


TARIFF,  TRUSTS  AND  POLITICS. 


By  Alexander  H.  Revell. 


Mr.  Chairman  and  Gentlemen  of  the  National  Business  Congress : 

America  is  at  peace  with  the  world.  Our  land  is  free  from  pes- 
tilence, strikes  and  famine.  Crops  have  been  abundant  for  a  dozen 
years.  Money  is  plentiful  at  reasonable  rates.  Enterprise  is  ready 
and  anxious  to  embark  on  new  and  greater  undertakings.  Our  re- 
sources are  unlimited ;  our  opportunities  boundless. 

But,  in  business,  inaction  rules  where  activity  should  prevail. 
Apprehension  and  mistrust  occupy  the  place  where  justifiable  opti- 
mism ought  to  be  conspicuous.  Millions  of  dollars  of  investments 
lie  idle  and  unproductive ;  millions  of  willing  hands  are  deprived  of  a 
fair  opportunity  to  make  the  effort  that  either  now,  or  in  the  future 
will  keep  the  wolf  from  the  door.  Every  prudent  industrialist  in 
the  country  is  manufacturing  as  nearly  as  possible  only  for  orders 
actually  received,  instead  of  making  or  ordering  ahead  the  finished 


10  NATIONAL     BUSINESS     CONGRESS 


work  in  sturdy  confidence  of  future  demands.  American  prosperity 
hesitates,  and  threatens  to  halt.  What  is  the  matter?  The  answer 
is  easy : 

"Tariff  Tinkering!" 
"Trust  Busting!" 
"PoHtical  Hypocrisy!" 

The  Republican  party  originated  the  present  protective  tariff 
system  and  has  upheld  and  defended  it  for  nearly  half  a  century. 
During  the  same  period,  year  after  year,  decade  after  decade,  the 
critics  of  that  party  assailed  the  protective  poHcy  and  went  before 
the  people  demanding  and  pleading  for  "free  trade,"  or,  "a  tariff  for 
revenue  only."  Their  efforts  have  failed.  The  earnest,  well-meant 
effort  of  Mr.  Cleveland  in  the  direction  of  free  trade,  during  his  last 
term  of  office,  brought  about  his  own  personal  repudiation  by  his 
party,  and  permitted  the  upcoming  of  Mr.  Bryan  with  his  free  silver 
nostrum  in  1896. 

I  am  not  prepared  to  say  that  there  are  not  defects  in  the  Ameri- 
can tariff  schedules.  Nothing  that  comes  out  of  the  hand  or  brain 
of  imperfect  man  can  be  expected  to  be  free  from  human  defects. 
And,  when  a  tariff  schedule  is  adopted  which  is  the  result  of  the 
effort  of  one,  and  of  the  opposition  of  another,  it  may  be  expected 
that  it  wall  represent  compromise  of  right  with  wrong,  rather  than 
the  realization  of  idealism. 

Another  thing:  Whatever  its  defects,  the  American  people 
have  established  a  method  of  living  under  our  tariff  system  practi- 
cally as  the  system  exists  today.  That  is  to  say,  every  business  is 
adjusted  to  every  other  business— each  is  fitted  to  all,  and  all  to  each. 
Our  commercial  system  rests  upon  confidence,  and  confidence  is 
simply  belief  in  the  stability  of  existing  conditions.  Changes  in  the 
tariff  schedule,  no  matter  how  well  sustained  by  theoretical  justice, 
must  of  necessity  operate  to  disturb  the  established  relationships  of 
all  industrial  products  one  with  another.  When  probably  every  im- 
post duty  in  the  entire  tariff  schedule  is  objected  to  and  asked  to  be 
revised  downward,  or  upward,  by  somebody  or  another,  it  may  be 
expected  that  business  action  will  await  results. 

The  evils  of  "tariff  tinkering"  are  not  wholly  in  the  changes 
which  actually  may  be  made  in  the  rate  of  duty ;  for,  once  a  change 
is  made,  business  conditions  adjust  themselves  according  to  the  new 
method  of  living.     It  isn't  the  actual  changes :  it's  the  apprehension 


NATIONAL     BU  SINESS     CONGRESS U 

of  possible  changes — the  waiting  to  know — preparedness  for  the 
worst.  Mr.  Kiphng.  in  one  of  his  best  poems,  portrays  the  despera- 
tion of  waiting : 

"What  makes  the  soldier's  heart  to  penk,  wot  makes  'im  to  perspire? 

It  isn't  standin'  up  to  charge  or  lyin'  down  to  lire: 

But  it's  everlastin'  waitin'  on  a  evcrlastin'  road, 

For  the  commissariat  camel  and  his  commissariat  load." 

It  isn't  accomplished  tariff  changes  that  business  fears,  it's  the 
everlastin'  "tariff  tinkering"  that  ends  in  no  results  for  those  who 
demand  revisions,  but  which  makes  business  halt  and  stand  waiting 
for  fear  something  awful  may  happen.  And,  this  does  not  mean 
that  only  those  business  concerns  that  may  be  hit  by  a  tariff  reduc- 
tion wait  for  the  blow  to  fall.  It  is  as  much  a  fact  that  those  con- 
cerns wdiich  will  be  benefited,  wait,  for  they  cannot  afford  to  manu- 
facture stocks  of  goods  or  material,  which,  later  on,  they  may  pro- 
duce at  less  cost. 

Business  is  tied  together — all  its  elements  are  interdependent. 
You  might  as  well  try  to  take  a  foot  out  of  an  Atlantic  cable,  a  sec- 
tion out  of  a  Brooklyn  bridge,  a  stone  out  of  an  arch,  or  a  rail  out 
of  a  railroad,  as  to  change  one  schedule  without  affecting  another 
business.  Alore  than  people  realize,  prosperity  is  a  matter  of  busi- 
ness unity — not  of  conflict — not  of  uncertainty — not  of  failure  here 
and  success  there. 

Industrial  uncertainty  and  inaction  results  in  non-employment  of 
wage  workers.  This  means  reduced  consumption ;  and,  this,  again, 
operates  to  retard  business  generally.  The  ear  of  honest  ignorance  is 
too  receptive  to  the  agitator  who  makes  it  appear  that  the  hardships 
of  labor  brought  on  by  "tariff  tinkering"  are  only  to  be  relieved  by 
more  "tariff  tinkering."  and  more,  and  more. 

It  is  not  strange  that  the  unscrupulous  agitator  who  cares  for 
nothing  but  popular  support  should  seek  to  mislead  the  ill-advised 
public.  It  is  not  strange  that  the  ofttimes  vanquished  enemies  of 
protection  should  clamor  for  tariff  revision,  and  their  clamor  may 
be  sincere.  Were  it  not,  how^ever,  for  possibilities  of  agitation  some 
politicians  would  have  little  excuse  for  political  existence.  And 
there  are  those  who  think  that  the  present  administration  and  Re- 
publican leaders  are  laying  themselves  open  to  the  charge  that  they 
have  become  renegades  to  the  faith  that  made  their  leadership  pos- 
sible. 

-     But,  again,  this  is  not  saying  that  our  tariff  schedules  are  per- 
fect, or  nearly  perfect.     I  am  not  prepared  to  say  that  there  should 


12  NATIONAL     BUSINESS     CONGRESS 

not  be  a  more  or  less  sweeping  revision.  But.  whatever  is  clone 
should  be  done  for  the  good  of  business — not  for  the  benefit  of  poli- 
tics or  politicians.  Some  of  our  industries,  protected  in  their  in- 
fancy by  the  tariflF,  have  grown  strong  and  powerful  and  monopo- 
listic. The  true  theory  of  protection  is  to  uphold  and  encourage  a 
feeble  industry  until  it  can  hold  its  own  against  the  world.  After 
that  it  would  seem  that  it  needs  but  little  protection. 

It  is  difficult,  without  saying  over-much,  to  enter  into  a  discus- 
sion of  specific  remedies  for  tariff  inequalities.  Perhaps  the  exist- 
ing tariff  commission  can  be  expanded  from  a  mere  advisory  body 
into  an  administrative  commission.  Without  having  reached  a  hard 
and  fast  conclusion,  it  seems  to  me  that  a  tariff  commission,  some- 
what like  the  Interstate  Commerce  Commission,  empowered  to  ad- 
just tariffs,  one  with  another — the  same  as  railroad  rates  are  now 
adjusted — might  meet  requirements.  It  might  be  wise  to  make  it 
possible  for  those  who  have  complaints  against  our  tariff  schedules 
to  appeal  to  such  a  commission  instead  of  going  before  the  public 
and  making  the  tariff  the  football  of  politics.  This  would  be  some- 
what after  the  Canadian  idea,  which  seems  to  work  well. 

Whilst,  therefore,  admitting  that  the  various  schedules  of  the 
tariff  from  time  to  time  should  be  changed  by  reductions,  and  per- 
haps by  an  increase,  there  should  be  a  reasonable  stability  secured 
when  once  the  tariff  is  so  changed.  I  favor  a  protective  tariff  as 
against  free  trade,  but  this  is  not  a  discussion  of  the  relative  merits 
of  the  two  propositions. 

It  should  be  understood,  however,  that  a  schedule  so  fixed 
should  stand  over  a  period  of  at  least  ten  years  and  probably  up  to 
twenty,  and  made  almost  as  hard  to  change  as  it  is  today  to  get  an 
amendment  to  our  Constitution. 

The  general  stability  of  our  business  conditions  is  more  import- 
ant than  a  change  in  any  schedule  could  possibly  be. 

It  is  barely  possible  that  if  a  schedule  were  fixed  for  twenty 
years,  some  very  great  emergency  might  arise  calling  for  an  increase 
or  a  decrease  after  five  or  ten  years.  This  is  what  I  mean  by  saying 
that  the  emergency  would  have  to  be  of  a  most  unusual  character 
before  the  demand  would  be  substantially  presented  or  considered 
for  any  change  within  the  fixed  term  of  years. 

Then  there  is,  also,  "Trust  Busting !" 

In  this  must  be  included  all  the  onslaughts  that  are  being  made 
on  capital  invested  in  large  concerns.     The  attitude  of  some  leaders 


NATIONAL     BUSINESS     CONGRESS  13 

is  being  emulated  by  the  newly  elected  or  appointed  and  untried 
officials  in  Washington,  whose  slogan  seems  to  be  "hit  some  big  en- 
terprise and  be  immediately  known." 

Sometimes  action  is  brought  under  the  Sherman  Anti-trust  law, 
the  design  being  to  break  up  and  disorganize  a  business  concern 
which  was  organized  supposedly  according  to  law,  and  tolerated  for 
years  without  complaint  or  warning — and,  with  the  Anti-trust  law 
on  the  statute  books  all  the  time.  Such  actions  to  secure  the  disso- 
lution of  combinations  are  brought  upon  the  theory  that  if  the  com- 
bination is  dissolved  "restored  competition"  will  insure  lower  prices 
to  the  public. 

It  is  true  that  the  philosophizing  of  Adam  Smith  ushered  in  the 
era  of  competition  to  take  the  place  of  government  regulation, 
which,  at  and  before  his  time,  prescribed  the  prices  of  commodities 
everywhere.  And,  competition  was  properly  in  order  then.  In 
those  days  when  nails  and  horseshoes,  and  such  things,  w^ere  made 
by  hand  by  individual  workmen,  competition  could  be  relied  on  to  be 
regulative  of  prices.  But  things  are  dififerent  now.  Manufactured 
articles  are  made  by  machinery.  Large  capital,  organization,  and 
many  workmen  are  required.  To  forbid  combinations  that  enable 
the  most  economical  methods  of  production  is  to  make  warfare  on 
human  advancement. 

Undoubtedly,  regulation  is  needed.  I  mean  especially,  that  sort 
of  regulation  which  punishes  act  by  act  each  violation  of  the  rule  of 
the  common  law  that  the  needs  of  men  shall  not  be  taken  advantage 
of  by  conspiracy  to  collect  extortionate  prices.  I  am  not  inclined  to 
believe  that  economic  combinations  are  ordinarily  disposed  to  such 
a  policy  where  a  virtual  monopoly  has  not  been  established.  Why  ? 
Simply  because  the  manufacturer  realizes  that  to  obtain  for  himself 
the  largest  net  income  the  price  must  be  such  as  to  induce  large  con- 
sumption of  the  article  produced.  That  is  to  say,  he  must  not  make 
his  price  so  high  that  demand  will  diminish,  nor  so  low  that  he  will 
sell  much  and  make  but  little  profit.  The  largest  of  the  great  com- 
binations attacked  by  the  government  under  the  Anti-trust  law  have 
generally  pursued  this  course,  not  perhaps,  for  the  sake  of  the 
morals  of  it,  but  because  it  has  been  sound  business  policy  to  do  so. 
If  unrestrained  promoters  and  unwholesome  commercial  pirates 
will  recklessly  run  into  law-breaking  after  the  law  is  fully  de- 
termined, we  should  treat  such  an  offender  as  we  w^ould  any  other 
malefactor.     His  offense  is  not  against  a  few  competitors,  or  a  few 


14  NATIONAL     BUSINESS     CONGRESS 


consumers.  It  is  against  tlie  stability  of  the  trade  of  the  United 
States — a  menace  to  the  peace,  security  and  happiness  which  proper 
business  methods  will  never  impair.  A  monetary  fine  alone  will 
not  restrain  the  ofifender.  A  fme  and  imprisonment,  both  together, 
will  be  the  only  punishment  that  will  make  such  violators  of  law 
stop  and  think. 

There  is  another  feature  of  this  phase  of  the  subject:  The 
action  of  one  branch  of  the  government  is  now  being  directed  to 
breaking  up  combinations,  so  that  "competition  will  regulate  prices." 
Another  branch  of  the  government  is  regulating  charges  of  railroads 
upon  the  theory  that  the  competition  which  it  is  "restoring"  will  not 
regulate  prices.  Thus,  it  appears  that  the  government  lacks  conti- 
dence  in  its  own  policies  which  are  actually  in  conflict  with  each 
other. 

On  top  of  all  this  harassment  is  the  net  income  tax  which  per- 
mits a  government  agent  to  examine  the  books  of  every  corporation, 
he  seeing  to  it,  among  other  things,  that  they  are  not  violating  the 
Anti-Trust  or  Interstate  Commerce  Law. 

The  whole  government  proceeding  is  confusing  and  contradic- 
tory, and  leads  in  the  direction  of  a  system  of  government  espion- 
age of  all  private  affairs.  And,  this  in  a  country  where  liberty  is 
not  to  be  restrained,  and  only  the  abuse  of  it  punished ! 

In  a  recent  widely  published  Hot  Springs,  Virginia,  interview, 
the  President  is  reported  as  saying  that  "in  emergencies  the  govern- 
ment can  raise  the  1%  corporation  tax  to  2%  or  37o."  Unfortu- 
nately this  is  too  true. 

All  values  in  this  country  are  behind  the  government  in  great 
emergencies,  and  all  values  should  be.  But  why  call  explicit  atten- 
tion, with  pride  in  the  utterance,  to  the  accomplishment  of  so  grand 
a  work,  which  places  a  part — understand  a  part — of  industry  in 
this  country,  that  is  already  paying  1%,  in  the  hands  of  the  govern- 
ment to  further  assess  2%  or  3%,  perhaps  10%  or  20%  of  their 
profits  ? 

Why  "rub  it  in"  as  the  street  phrase  allows  us  to  say,  calling 
unnecessary  attention  to  the  instability  of  corporation  profits,  when 
he  must  be  aware,  that  right  or  wrong,  the  present  corporation  tax 
is  nothing  more  than  class  legislation — partnerships  and  private 
ownerships  being  free  of  such  taxation  ? 

Although  nearly  three  weeks  have  elapsed,  we  have  been  look- 
ing in  vain  for  some  modification  or  denial  of  that  part  of  the  inter- 
view. 


NATIONAL     BUSINESS     CONGRESS  15 

Indirectly  this  strenuous  zeal  we  are  criticising,  in  effect,  tells 
investors  that  they  are  not  safe  if  they  put  their  money  into  any 
enterprise  which  promises  to  pay  more  than  4%.  If  the  political 
statesmen  keep  on,  we  wall  soon  begin  to  think  they  are  right. 

All  my  life  I  have  been  a  Republican  and  have  learned  to  look 
to  the  Republican  party  and  Republican  officials  to  safeguard  the 
"general  welfare."  The  Republican  party  sprang  into  being  upon 
the  great  moral  issue  of  human  liberty.  It  conducted  the  war 
against  Secession  and,  in  doing  so,  allied  with  itself  the  business 
interests  of  the  north.  Finally,  the  war  ended,  it  continued  in 
power,  devoting  itself  to  maintaining  the  financial  credit  of  the 
nation,  the  development  of  our  industries  and  the  extension  of  our 
commerce.  I  think  you  will  agree  with  me,  regardless  of  party 
affiliations,  that  a  great  majority  of  the  people  came  to  regard  Re- 
publican success  as  an  assurance  of  prosperous  times. 

But  now  conditions  have  changed,  and,  as  if  accepting  the  criti- 
cism of  its  traditional  rival  as  justifiable.  Republican  officials  at 
Washington  are  running  amuck,  and  the  business  interests  of  the 
country  are  paralyzed  with  apprehension  lest  the  hand  that  fostered 
and  protected  them  in  the  past  shall  strike  them  downi  in  the  future. 
After  about  eight  years  of  crusade,  wherein  much  excellent  work 
has  been  accomplished,  which  work — permit  me  to  say — I  would 
not  undo  if  I  could,  the  present  "trust  busting"  policy  at  Washing- 
ton lacks  discretion,  business  discernment  and  common  sense.  It 
lacks  the  support  of  real  republicans.  It  looks  like  a  superabund- 
ance of  legal,  and  a  dearth  of  practical  intelligence. 

The  suits  against  the  tobacco  trust  and  the  oil  corporation  were 
justifiable,  and  on  account  of  most  flagrant  and  unjust  competition 
could  not  and  should  not  have  been  avoided.  They  were  a  natural 
and  proper  outcome  of  the  crusade  which  had  gone  before.  It  is 
hard  to  see,  however,  where  the  direct  good  is  coming  to  the  public. 
The  recent  suit  begun  against  a  great  industrial  corporation  was 
merely  the  culmination  of  a  series  of  ill-timed  and  ill-considered, 
seemingly  political,  attacks  upon  the  greater  business  interests  of  the 
country.  These  assaults,  if  they  are  really  sincerely  devised,  are 
designed  to  revive  the  conditions  of  competition  that  existed  before 
the  combinations  were  brought  about. 

Even  if  the  suits  are  successful  it  is  not  possible  for  us  to  go 
back  to  the  old  days  of  ruinous  competition.  We  have  evolved  out 
of   the   unwholesome   practice   of    cut-throat    commercial    warfare. 


16  NATIONAL    BUSINESS    CONGRESS 

Business  intelligence  and  conservatism  is  now  such  that  competition 
would  not  be  carried  on  even  if  all  the  combinations  were  dissolved. 
And,  the  people  do  not  want  the  old  system. 

Do  they  want  a  railroad  policy  on  which  passengers  and  freight 
will  have  to  be  transferred  at  state  lines,  under  which  prices  of 
stocks  of  goods  will  be  uncertain  and  indeterminate? 

We  hear  much  about  "monopoly."  What  is  monopoly? 
The  Democrats  in  1908  declared  in  effect  that  monopoly  should  be 
considered  the  control  of  50  per  cent  of  a  given  industry.  Are  the 
Republicans  going  to  accept  the  Democratic  dictum?  And,  what  is 
to  be  feared  from  monopoly?  I  have  already  touched  upon  this 
point,  but  will  add  that  a  monopoly  is  dangerous,  because  it  has  the 
power  to  charge  extortionate  prices.  Now  then,  if  a  monopoly 
charges  excessive  prices,  it  ought  to  be  dealt  with  on  the  basis  of 
the  criminality  of  its  specific  acts  of  oppression.  A  great  business 
organization  should  not  be  torn  asunder  and  destroyed  because  per- 
chance some  official  of  it  might  possibly,  by  an  unlawful  exercise  of 
his  power,  demand  extortionate  prices.  In  case  of  monopoly  we 
have  regulation  to  fall  back  upon. 

In  European  countries  monopoly,  trusts,  or  what  are  called 
"groupements"  in  one  nation  and  "cartels"  in  another,  are  en- 
couraged by  the  governments.  In  America  the  economic  wisdom — 
the  saving — of  combinations  seems  to  be  wholly  lost  sight  of.  The 
great  combination  is  an  economic  unit — the  form  in  which  pro- 
ductive results  can  be  most  economically  produced,  and  it  ought  to 
be  protected,  as  far  as  it  is  right,  and  not  be  destroyed.  The  great 
American  industrial  combinations  are  competing  in,  and  conquering 
the  markets  of  the  world.  If  we  wish  to  go  into  the  laws  of  nature, 
we  find  combination. 

What  has  helped  to  make  this  nation  one  of  the  biggest  and 
greatest  on  earth?  It  came  through  combination,  centralization, 
economizing  the  cost  of  administration  and  protection. 

If  the  arguments  which  have  recently  been  made  by  the  latter 
day  statesmen  mean  anything,  the  Louisiana  Purchase  should  never 
have  been  made — these  forty-five  states  should  never  have  been 
combined  or  permitted  to  blossom  into  one  grand  republic.  It  was 
in  restraint  of  the  growth  and  expansion  of  other  nations — a  killing 
off  of  competition — an  acquisition  of  territory  which  should  have 
been  left  to  weaker  or  distant  nations. 


NATIO^fAL     BUSINESS     CONGRESS  17 

Another  thing:  In  all  this  talk  ahout  offenses  against  the  law 
it  is  estimated  that  less  than  three  per  cent  of  the  business  interests 
of  the  country  are  even  under  government  suspicion.  And,  because 
of  this  complaint  of  three  per  cent,  the  other  ninety-seven  per  cent 
of  business  is  powerless  to  proceed,  or  if  it  does,  it  is  at  a  snail's 
pace.  It  does  not  answer  the  question  nor  ameliorate  the  business 
situation  to  know  that  the  small  concerns,  which  too  often  have  pro- 
moted this  fight  against  the  large  ones,  are  now  common  sufferers 
with  those  upon  whom  they  have  brought  down  the  wrath  of  an 
impossible  law. 

That  the  country  has  been  able  to  do  so  well  during  the  long 
drawn  out  crusade  is  the  surprising  feature.  It  only  still  further 
emphasizes  the  fact  that  the  basis  of  this  country's  values  and  the 
inherent  energy  put  forth  by  those  who  are  doing  its  every  day  work 
compels  some  good  results  in  spite  of  those  who  constantly  plot  to 
further  aggravate  the  situation. 

But  all  this  does  not  mean  that,  its  own  interests  alone  con- 
sidered, great  business  concerns  should  not  be  regulated,  and  saved 
from  ruinous  internecine  strife.  Look  what  regulation  has  done  for 
banking.  Does  any  banker  want  to  go  back  to  wildcat  banking? 
Does  any  insurance  man  want  a  return  of  the  days  of  graveyard 
insurance?  As  in  the  matter  of  tariff,  regulation  is  not  so  much  a 
question  of  method  as  of  motive.  Regulation  should  be  for  the  sake 
of  greater  stability — not  for  the  convenience  of  politics.  I  will  not 
attempt  to  prescribe  a  plan ;  but.  there  are  some  general  principles 
which  must  not  be  lost  sight  of  in  any  governmental  regulation.  In 
my  view,  the  following  are  important: 

Uniform  accounts,  and  rational  publicity  of  accounts. 

Increase,  or  other  changes  of  capitalization,  only  on  per- 
mission of  government  through  its  proper  department. 

Stock  exchanges  not  to  be  permitted  to  traffic  in  securities 
not  authorized  by  the  government.  Mails  also  might  exclude 
them. 

Corporations  not  to  enter  into  combinations  or  pools  with- 
out specific  government  authorization. 

The  government,  through  its  agents,  to  have  authority  to 
inspect  all  corporation  papers  and  contracts. 

Complaints  as  to  unjust  and  unwholesome  competition  to 
-have  immediate  investigation  under  proper  rulings  or  restric- 
tions. 


18  NATIONAL     BUSINESS     C  O'N  G  R  E  S  S 

In  the  case  of  tariff-protected  concerns,  the  government  to 
have  a  right  to  see  to  it  that  the  henelits  of  protection  are  fairly 
divided  betv^een  the  pubhc,  capital  and  labor,  as  declared  for  in 
the  national  party  platforms. 

I  am  aware  that  the  reply  to  what  I  have  said  about  enforcing 
the  law  is,  that,  "We  must  enforce  the  Anti-trust  law  because  it  is 
law."  In  fact  the  President  has  expressed  himself  over  and  over 
again  as  determined  to  enforce  it,  as  if  to  do  so  were  a  virtue  beyond 
criticism.  Lawyers  have  been  known  to  fit  a  law  to  any  desired 
situation.  I  believe  in  law.  I  believe  in  the  enforcement  of  law, 
but  the  manner  of  administration  of  law  should  be  tempered  with 
wisdom  and  discretion.  The  United  States  government  was  formed 
especially  to  promote  the  "general  welfare,"  and  our  courts  have 
many  times  set  aside  laws  that  were  constitutionally  valid  merely  on 
the  ground  that  they  were  against  public  policy.  Any  executive  of- 
ficer can  go  fast  or  slow  in  the  enforcement  of  laws ;  and,  in  fact,  no 
regulative  law  is  ever  enacted  with  the  wish  or  expectation  that 
it  will  be  drastically  enforced— enforced  with  such  completeness  or 
suddenness  as  to  disorganize  existing  conditions.  Sometimes  one 
can  be  "so  just  as  to  be  terribly  cruel." 

We  may  now  recall  with  profit  that  the  "higher  law"  of  human 
liberty  induced  the  Republican  state  governments  of  the  North  to 
refuse,  or  fail  to  enforce  the  Fugitive  Slave  laws.  The  Greenback 
policy,  which  saved  the  Union,  was  held  to  be  at  variance  with  the 
Constitution,  until  a  revised  and  augmented  Supreme  Court  decided 
differently. 

And,  while  on  the  matter  of  discretion  let  me  say  that  no  ad- 
ministration for  fifty  years  has  had  the  temerity  to  see  to  it  that  the 
Constitution,  giving  the  negro  a  right  to  a  free  and  unrestricted 
ballot,  was  enforced. 

Consider  how  long  the  Interstate  Commerce  Commission  has 
been  enforcing  the  safety  appliance  laws.  It  may  be  averred  that 
the  Anti-trust  law  has  been  on  the  statute  books  for  twenty  years. 
This  is  true ;  but  it  is,  also,  a  fact  that  until  1903  it  was  not  seriously 
regarded  as  applying  to  railroads.  And,  after  that  it  was  not  under- 
stood that  it  actually  forbade  the  combinations  that  have  grown  up 
under  it.  By  not  enforcing  it,  by  not  indicating  the  extent  of  its 
supposed  application,  the  government  has  given  tacit  consent  to 
every  combination  that  has  been  formed.  Justification  for  the  dis- 
memberment of  great  business  organizations  and  injury  of   their 


NATIONAL     BUSINESS     CONGRESS  19 


stockholders,  is  not  established  by  the  mere  fact  that  the  government 
has  the  power  to  do  thus  and  so.  Justification  for  impetuous  zeal 
in  enforcing  the  Anti-trust  law  would  only  arise  from  the  fact  that 
the  public  welfare  imperatively  demands  enforcement.  By  the  same 
sign,  the  English  rule  of  "go-slow"  may  properly  be  applied.  In- 
stead of  enforcing  it  as  hard  as  possible,  it  should  be  enforced  with 
as  little  destructive  effect  as  possible.* 

The  average  successful  manufacturer  is  the  man  who  made  a 
dollar  for  each  ten  dollars  he  put  into  the  business,  and  who  in  turn 
put  that  dollar,  and  as  many  more  as  he  could  borrow,  right  back 
into  the  business.  We  will  say  that  over  a  long  period  of  years  he 
has  builded  a  fifty  or  a  hundred  thousand  dollar,  a  million  or  a  ten 
million  dollar  concern.  As  an  average  proposition,  he  or  his  asso- 
ciates cannot  sell  the  plant  if  they  try.  It  is  a  going  concern.  They 
must  keep  it  going  to  get  anything  out  of  it,  and  when  the  lean 
years  come,  it  is — if  you  will  permit  me  to  borrow  another  expres- 
sion from  the  street — "a  lemon." 

The  efforts  of  a  statesman  should  be  to  assist  in  avoiding  lean 
years  and  encourage  the  other  kind.  The  man  who  takes  raw 
material,  and  by  the  employment  of  labor,  makes  it  into  a  thing  of 
value,  who,  in  good  years  plans  an  overhead  expense,  commensurate 
with  a  judicious  faith  and  optimism  in  his  enterprise  and  in  his 
country,  is  the  man  who  is  hardest  hit  by  the  political  ambitions,  or 
the  desire  for  notoriety  of  some  of  our  so-called  statesmen  and  of- 
fice holders. 

In  making  these  criticisms,  it  would,  perhaps  be  well  to  say  that 
I  have  been  in  full  sympathy  with  Roosevelt  and  Taft  in  their  best 
efforts  to  round  up  the  business  field;  we  have  helped  fight  their 
battles  and  used  their  arguments,  but  the  present  decade  has  had 
about  all  it  can  stand.  In  common  with  millions  of  others,  I  am 
tired  of  it,  and  believe  that  the  average  honest  business  man  of  the 
nation  should  noiv  be  given  a  chance  to  live  a  portion  of  his  life  free 
from  mischievous  and  unproductive  interference. 

Hundreds  of  thousands  of  manufacturers  are  coming  to  believe 
that  there  is  now  more  politics  and  hypocrisy  in  it  all  than  there 
is  of  the  Spartan  honesty  Washington  would  have  us  think;  and 
they  object  to  carrying  the  burden  any  longer. 

■*Be  sure  and  read  Ex-Senator  Edmunds'  splendid  article  in  the  De- 
cember North  American  Review.  Ex-Senator  Edmunds  was  the  author  of 
the  Sherman  Antitrust  law. 


20  NATIONAL     BUSINESS     CONGRESS 


We  believe  that  with  a  deeper  thought,  with  a  more  statesman- 
hke,  a  more  progressively  constructive  ability  than  has  been  shown, 
we  could,  with  the  new  and  honest  business  conditions  already 
secured  as  our  basis,  regain,  before  it  is  too  late,  the  benefits  of 
prosperity  to  all  the  people. 

The  present  administration  confronts  the  possibility — some  be- 
lieve, certainty — of  defeat,  if  iron-handed  enforcement  of  disorgani- 
zing commercial  legislation  is  continued.  The  people  look  at  results 
as  reflected  in  the  business  conditions  of  the  country.  They  have 
little  excuse,  but  much  condemnation,  for  hard  times. 

Sound  advice  to  manufacturers  and  business  men  everywhere 
is — organize — keep  your  eye  on  your  congressman  and  your  senator, 
to  say  nothing  of  a  few  others  in  Washington.  Don't  judge  them 
on  one  vote  or  two,  but  the  moment  you  decide  that  the  inclination 
is  to  play  politics,  try  to  reform  them.  Better  reform  than  defeat. 
Your  next  man  could  also  be  a  hypocritical  saint.  After  making 
the  effort,  how^ever,  your  full  duty  has  been  fulfilled.  If  he  prefers 
and  continues  the  game  you  object  to,  start  at  once;  don't  wait.  De- 
feat him  at  the  next  primary  or  main  election,  A  few  friends  of 
the  "honorable  statesman"  who  have  received  favors,  perhaps 
against  the  public  interest,  will  oppose  you  and  help  the  official. 
Don't  mind  that.  They  are  the  most  senseless  of  all  men  engaged 
in  industry. 

Locate  some  of  the  industries  today,  which  are  or  have  been 
under  fire  of  the  government,  and  you  will  find  those  who  are  no- 
torious for  the  acceptance  of  political  favors  in  the  past.  They  are 
receiving  the  only  and  eventual  reward  of  "truckling"  to  politicians 
who  favor  them,  when  that  favor  is  against  the  people.  And  if  we 
manufacturers  are  selfish  in  the  demands  w^e  make  upon  our  repre- 
sentatives, we,  in  turn,  will  and  should  receive  a  like  chastening. 

The  speaker  believes  that  it  will  not  be  long  before  the  names 
"Republican"  and  "Democrat"  as  applied  to  parties  will  be  merely  a 
memory;  the  names  mean  nothing  today.  The  principles  of  Re- 
publicanism and  Democracy  have  been  estabhshed ;  they  are  no 
longer  an  issue.  It  has  become  the  desire  of  those  who  are  "in"  to 
stay  "in,"  and  those  who  are  "out"  to  get  "in."  The  "outs"  pro- 
mulgate a  proposition  and  the  "ins"  wall  try  to  go  them  one  better, 
and  vice  versa. 

In  former  days  the  Republican  party  was  the  conservative 
party;  the  Democrats  the  radicals,  and  it  was  not  a  bad  division. 


NATIONAL     BUSINESS     CONGRESS  21 


Any  nation  should  have  at  least  two,  and  possibly  three  parties.  If 
two,  it  would  be  as  Conservatives  and  Radicals. ;  if  three,  the  Con- 
servatives, the  Liberals,  and  the  Radicals.  Then  the  parties  would 
undoubtedly  endeavor  to  live  up  to  the  names  and  be  a  check  on 
each  other.  In  fighting  for  their  principles,  they  should  be  willing 
at  times  to  go  down  in  defeat,  sticking  to  their  guns.  It  is  the  only 
way  apparently  to  emphasize  the  fact  that  much  of  the  promise  and 
agitation  of  those  who  are  out,  is  in  reality  a  dishonest  effort  to 
manufacture  discontent  with  the  incumbent  party.  Real  patriots 
would  not  be  moved  by  any  appeal  from  the  mob  or  moneyed  in- 
fluence which  sought  to  destroy  the  fundamental  policy  of  their 
party.  If  value  there  be  in  a  new  and  untried  policy,  permanent 
success  for  the  victorious  party  would  show  it. 

It  is  my  conclusion,  therefore,  that  we  should  work — 

For — A  more  stable  tarifif  schedule. 

For — An  amended  Sherman  law. 

For — A  complete  working  regulation  and  not  a  "Busting 
of  Trusts." 

For — The  defeat  of  self-seeking  political  agitators  who 
continually  make  for  disorder  in  industry. 

For — Party  names  in  politics  that  will  mean  something,  or 
fairly  stable  party  principles  that  we  can  hew  to. 

For — A  single  six  or  an  eight-year  term  for  President. 

For — An  established  sentiment  that  will  not  tolerate  in  the 
future  the  comparatively  new  and  increasing  practice  of  a 
President  leaving  Washington  on  short  or  long  trips,  the  appar- 
ent purpose  of  which  is  politics. 

For — A  preparation,  legally,  commercially  and  politically, 
to  handle  American  industry  in  a  comprehensive  far-reaching 
way. 

The  retrogressive  ideas  we  criticise,  hark  back  to  a  day  that 
is  dead,  and  make  in  favor  of  the  oldest  trust  of  all— the  Mummy 
Trust. 

Today,  between  the  grinding  stones  of  ambition,  politics  and 
hypocrisy — with  the  tariff  and  trust  agitation  as  added  emery— the 
average  manufacturer  of  this  country  is  lost;  and  at  the  bottom, 
bearing  it  all,  are  the  people — the  real  sufferers. 

With  the  beginning  of  the  present  congress,  let  us  hope  and 
pray  for  a  brighter  day.  In  the  broadest  sense  we  must  work  for 
man,  for  law,  for  country,  for  co-operation,  for  good-will  and  for 
industry.    There  is  a  world-wide  work  to  do.    It  is  a  noble  and  in- 


22  NATIONAL     BUSINESS     CONGRESS 

spiring  labor.  Without  the  handicaps  we  have  been  constantly  com- 
pelled to  face,  we,  of  the  United  States,  CAN,  WE  WILL,  WE 
MUST  take  and  bear  our  full  share.     (Applause.) 

The  Chairman:  We  have  carried  out  our  morning  program, 
gentlemen,  and  unless  you  have  some  objection,  we  will  adjourn 
until  2  :30  this  afternoon. 

Mr.  Frost:  Mr.  Chairman,  one  moment.  I  believe  the  Chair- 
man of  the  Entertainment  Committee  has  an  announcement  he  de- 
sires to  make,  or  perhaps  I  can  make  it  for  him.  He  will  be  in 
Room  10  at  the  conclusion  of  the  exercises  this  morning,  and  will 
there  distribute  tickets  for  the  theater  tonight.  All  of  the  delegates 
and  the  speakers  are  cordially  invited  to  meet  Mr.  Bode  after  ad- 
journment, in  Room  10,  outside  the  Gold  Room. 

]\Ir.  T.  M.  Sechler  (of  MoHne,  Illinois):  Mr.  Chairman: 
The  reference  by  our  speaker  to  the  Income  Tax  as  class  legislation 
calls  to  mind  the  rather  masterful  decision  of  our  Supreme  Court 
when  it  half-way  reversed  its  decision  of  twenty  years  before  on 
the  Income  Tax.  The  position,  practically,  is  this :  A  tax  on  in- 
come is  not  an  income  tax  if  it  is  discriminatory;  but  if  it  is  uni- 
form, as  provided  by  the  Constitution,  it  is  unconstitutional.  I  think 
we  are  pretty  good  American  citizens  if  we  do  not  lose  any  measure 
of  our  respect  for  that  august  body. 

The  meeting  adjourned  until  2  :30  o'clock  p.  m. 


NATIONAL     BUSINESS     CONGRESS  23 


SECOND   SESSION. 


Monday,  December  11,  1911. 
2:30o'clock  P.  M. 

The  meeting  was  called  to  order  by  Chairman  Sheldon. 

The  Chairman  :  The  Chairman  of  the  Entertainment  Com- 
mittee, gentlemen,  will  explain  to  you  what  he  has  in  mind  for  your 
entertainment. 

Mr.  Bode:  Mr.  Chairman,  and  Gentlemen,  Delegates  and 
Friends :  The  Entertainment  Committee  have  arranged  to  entertain 
you  this  evening  at  the  Chicago  Opera  House,  where  will  be  given 
"Gipsy  Love"  by  a  very  eminent  artist.  We  trust  you  will  avail 
yourselves  of  the  opportunity  of  attending  this  affair,  and  tickets  are 
at  your  disposal  in  Room  No.  10,  where  I  will  be  pleased  to  hand 
them  out.  In  addition  to  that,  there  will  be  an  entertainment  tomor- 
row evening.  The  Chicago  Grand  Opera  Company  will  present 
"Samson  and  Delilah."  We  do  not  wish  you  to  take  a  ticket  for  your- 
self only,  but  if  you  have  a  lady  here  we  will  be  pleased  to  extend 
the  invitation  to  her  as  well.  Further  than  that,  there  will  be  a  ban- 
quet on  Wednesday  evening.  I  trust  most  of  you  have  secured 
tickets  for  that ;  if  not,  if  you  will  present  yourselves  to  Secretary 
Burnham,  he  will  be  glad  to  present  tickets  to  you. 
(Applause.) 

The  Chairman:  Gentlemen,  the  first  speaker  of  the  after- 
noon is  Mr.  Henry  M.  Wallis,  of  Racine,  Wisconsin,  Chairman  of 
the  State  Legislation  Committee  of  the  National  Implement  and  \'e- 
hicle  Association,  who  will  address  you  on  THE  NECESSITY 
FOR  THE  BUSINESS  MAN  IN  POLITICS. 

Mr.  Chairman  and  Gentlemen :  It  is  an  honor  and  a  privilege 
of  which  I  am  deeply  sensible  to  be  invited  to  address  a  meeting 
of  representative  business  men  such  as  are  gathered  here  today 
under  the  auspices  of  the  National  Business  League  of  America.  I 
appear  before  you  not  entirely  in  an  individual  capacity,  but  as  the 
representative  of  the  National  Association  of  Implement  and  \'e- 
hicle  Manufacturers,  an  organization  employing  some  55,000  em- 
ployes, and  representing  business  interests  of  upwards  of  $300,000,- 
000.00;  an  organization  representative  in  its  membership  of  the  best 


24  NATIONAL     BUSINESS     CONGRESS 

that  there  is,  large  as  well  as  small,  in  their  allied  lines,  and  an 
organization  which  has  already  expressed  itself  upon  the  subject 
of  my  address — "The  Necessity  for  the  Business  Man  in  Politics." 
At  a  meeting  of  the  National  Implement  and  Vehicle  Associa- 
tion, held  in  this  room  on  October  17th,  18th  and  19th,  of  this 
year,  the  following  resolution,  introduced  by  me  as  Chairman  of  the 
States'  Legislation  Committee,  was  unanimously  adopted : 

Whereas,  In  the  minds  of  many  men  the  present  day 
trend  of  legislation  is  becoming  inimical  to  the  welfare  and  best 
interests  of  the  people,  because  upon  business  prosperity  hinges 
the  prosperity  of  the  wage-earner,  the  farmer  and  others,  and 
that  therefore  it  is  time  for  all  good  citizens  to  unite  in  oppos- 
ing further  unfair  and  unreasonable  legislation;  and 

Whereas,  The  continued  unjust  and  unreasonable  attacks 
upon  business  interests  and  persons  prominently  connected 
therewith,  regardless  of  the  effort  on  the  part  of  the  business 
men  generally,  to  comply  with  and  govern  their  respective  busi- 
nesses according  to  law ;  therefore  be  it 

Resolved,  That  the  President  of  this  Association  be  autho- 
rized to  appoint  a  committee  of  five  members  to  be  known  as 
the  committee  on  political  action,  for  the  primary  object  of  in- 
teresting other  organizations  to  appoint  similar  committees,  and 
when  such  committees  are  appointed,  to  obtain  a  joint  meeting 
of  all  the  committees  so  appointed,  for  the  purpose  of  consid- 
ering ways  and  means  and  recommendation  to  their  respective 
organizations  for  further  action. 

Do  not  mistake,  gentlemen,  the  object  of  the  appointment  of 
this  committee  on  Political  Action.  It  is  in  no  sense  partisan.  Our 
organization  is  strictly  non-partisan,  but  the  time  has  arrived  in  the 
judgment  of  our  Association,  when  business  men  should  unite  for 
political  action  in  its  broad  sense. 

Heretofore  the  business  man  has  been  in  politics  spasmodically, 
if  at  all,  as  he  was  in  1896,  the  result  of  which  memorable  cam- 
paign you  all  know.  It  was  a  glorious  victory  for  the  cause,  around 
which,  and  to  the  support  of  which,  business  men  of  this  country 
rallied. 

The  situation  today  is,  I  admit,  a  more  complicated  one  for 
business  men  generally  to  unite  upon.  In  1896  we  had  before 
us  a  well-defined,  specific  issue,  upon  which  the  two  great  politi- 


NATIONAL     BUSINESS     CONGRESS  25 


cal  parties  were  divided,  and  the  business  interests  were  rallied 
under  the  banner  of  the  party  which  stood  for  the  maintenance 
of  the  gold  standard,  but  the  fundamental  cause  which  aroused 
us  was  the  fact  that  we  deemed  our  business  interests  in  jeopardy; 
and  so  I  take  it  we  are  gathered  here  today  because,  again,  we  recog- 
nize that  our  respective  businesses  are  being  menaced  by  some,  if 
not  many,  of  the  present-day  political  theories,  and  because  of  the 
further  fact  that  since  1896  too  many  of  the  business  men  of  this 
country  have  been  neglecting  their  political  business. 

1  know  well  the  antipathy  felt  by  the  average  business  man 
today  being  mixed  up  in  politics.  He  feels  that  he  has  no  time  for 
it,  is  not  fitted  for  it,  and  is  thoroughly  disgusted  with  it.  These 
sentiments  I  fully  share,  but  feel  their  lack  of  sound  reasoning,  and 
regard  them  in  the  nature  of  an  excuse.  As  business  men  ac- 
customed to  analyzing  situations,  drawing  conclusions  and  acting, 
what  shall  we  do  about  the  situation?  Shall  we  sit  still  and  allow 
the  demagogue  and  the  politician  to  continue  to  sway  public  opinion 
and  control  legislation?  Or  shall  we  in  the  future  have  something 
concrete  to  say  as  to  the  laws  that  shall  be  enacted,  governing  and 
affecting  our  business  and  the  commerce  of  this  great  nation  ?  If  the 
answer  is  in  the  affirmative,  how  shall  we  proceed? 

This  is  a  serious  question.  The  field  is  large,  the  ramifications 
many,  and,  before  attempting  recommendations,  I  desire  to  present 
for  analysis  certain  phases  of  the  situation  confronting  us. 

It  is  generally  conceded  by  business  men  that  there  is  too  much 
agitation,  sensation  and  political  legislation.  Much  of  this  is  due 
to  the  lack  of  business  ability  in  our  legislative  bodies.  There  are 
too  many  incompetent  legislators,  and,  in  proportion  to  business 
men,  too  many  lawyers  making,  or  seeking  to  make,  laws  for  us. 
We  need  more  business  men  in  Congress,  and  in  the  State  Legis- 
latures, if  we  are  to  have  clear,  w^ell-defined,  workable  laws,  without 
jokers— laws  which  can  readily  be  interpreted  and  under  which  we 
can  intelligently  conduct  our  business  according  to  law,  which  busi- 
ness men  generally  are  not  only  willing  but  anxious  to  do. 

The  present-day  trend  of  legislation.  National  and  State,  is  to 
regulate  every  function  and  activity  of  life  by  statutory  enactment, 
and,  as  indicative  of  the  law-making  craze  sweeping  this  country,  it 
may' be  of  interest  for  you  to  know  the  number  of  bills  introduced 
and  enacted  into  laws  in  some  of  the  states  in  which  legislative  ses- 


26  NATIONAL     BUSINESS     CONGRESS 

sions  have  been  lield  during  the  past  year.  In  the  state  of  Nebraska 
there  were  1,000  bills  introduced,  227  of  which  were  enacted  into 
laws : 

Indiana  1,200  introduced,  292  enacted  into  laws. 

Wisconsin 1,690  introduced,  665  enacted  into  laws. 

Missouri 1,728  introduced,  229  enacted  into  laws. 

Massachusetts 3,594  introduced,  1,394  enacted  into  laws. 

(Massachusetts  has  a  legislative  session  every  year.) 

New  York 3,628  introduced,  869  enacted  into  laws. 

Pennsylvania  1,900  introduced,  847  enacted  into  laws. 

Other  states  have  been  more  or  less  prolific.  In  Oklahoma 
recently  a  law  has  been  passed  regulating  the  length  of  hotel  bed 
sheets.  Massachusetts  enacted  a  law  making  it  a  crime  punishable 
by  a  fine  of  $100.00  for  an  employer  to  employ  a  woman  two  weeks 
before  or  four  weeks  after  child-birth.  These  instances  sufficiently 
illustrate  the  law-making  craze  which  is  sweeping  these  states;  a 
like  tendency  also  animates  our  National  Legislative  body. 

We  have  heard  a  great  deal  about  "Undigested  Securities  of 
Wall  Street."  It  occurs  to  me  that  we  have  much  undigested  legis- 
lation, and  we  should  be  given  an  opportunity  to  Fletcherize  before 
having  another  batch  to  contend  with. 

What  we  need  at  present,  and  one  of  the  things  which  it  seems 
to  me  the  business  man  should  stand  for  is  sane,  economic  and  con- 
structive legislation  as  against  the  sentimentalism  which  has  re- 
sulted in  political,  rather  than  economic  and  constructive  legislation. 
In  other  words,  some  political  agitator  is  struck  by  a  brilliant  vote- 
getting  idea,  which  he  launches  with  great  eclat  and  with  little  re- 
gard for  the  underlying  basic,  economic  principles.  This  is  rushed 
through  the  legislature  as  a  hastily  drawn,  vote-getting  measure,  and 
too  often  becomes  enacted  into  law,  regardless  of  its  effects  upon 
the  business  interests  of  the  country. 

There  is  one  law  which  is  of  particular  interest  to  every  em- 
ployer of  labor,  namely:  "The  Workmen's  Compensation  Act," 
which  has  been  enacted  by  various  states.  I  want  to  direct  your  at- 
tention particularly  to  this  Act,  because  of  the  general  consideration 
now  being  given  by  nearly  all  of  the  states  to  the  passage  of  some 
form  of  "Workmen's  Compensation  Act"  and  to  the  necessity  for 
awakening  to  active  interest  in  the  operation  of  these  laws  in  the 
states  where  they  have  been  enacted  and  the  directing  of  correct  leg- 
islation in  the  states  where  such  laws  have  not,  as  yet,  been  enacted. 


NATIONAL     BUSINESS     CONGRESS  27 


and  as  well  as  to  preparation  for  dealing  with  the  amendments 
w^iich  are  sure  to  follow,  which  amendments  under  the  leadership 
of  politicians  will  result  in  so  enlarging  the  scope  of  these  laws  that 
we  may  find  ourselves  operating  under  conditions  as  bad,  or  worse 
than  those  now  existing  in  England.  The  scope  of  Compensation 
Acts  has  been  extended  in  England  to  such  an  extent  that  in  some 
respects  it  has  become  ludicrous.  As  illustrative  of  the  changes 
which  have  taken  place  there  during  the  past  decade,  permit  me  to 
quote  from  the  work  of  Thomas  Leaming,  entitled,  "A  Philadelphia 
Lawyer  in  the  London  Courts,"  in  the  concluding  chapter  of  which 
he  says : 

"Both  the  public  opinion  and  the  law  of  England  were  for  gen- 
erations characterized  by  the  quality  of  conservatism.  The  various 
reform  Acts,  starting  in  1812,  marked  the  advent  of  an  epoch  of 
individualism  which  lasted  for  over  fifty  years,  and  made  England  a 
land  where  personal  liberty  and  private  property  were,  perhaps, 
safer  than  ever  before  in  the  World's  history.  It  was  a  country 
where  the  government's  chief  concern,  was  to  furnish  irreproachable 
courts,  competent  police,  and  few  but  honest  civil  servants,  so  that 
each  man  might  pursue  happiness  after  his  own  fashion,  and  with 
the  least  possible  interference  and  yet  with  complete  confidence  that 
he  could  assert  his  rights  effectively  when  invaded.  Hence,  it  was 
that  America  learned  to  look  to  England  for  precedents. 

"All  this  is  changing.  The  substitution  of  the  doctrines  of  col- 
lectivism for  those  of  individualism  began  in  1885,  and  it  proceeds 
rapidly  in  many  directions.  The  Socialistic  harangues  one  hears 
from  vagabonds,  mounted  on  benches  in  Hyde  Park,  are  delivered 
without  interference  by  the  police.  The  spreading  of  discontent  by 
paid  agitators  proceeds  at  the  market  crosses  and  in  the  taverns  of 
the  villages  between  elections.  Later  the  politicians  appear  and 
solicit  votes  for  impossible  schemes,  an  increasing  proportion  of 
which  are  actually  adopted  by  Parliament,  and  of  which  the  laws 
regulating  liability  for  personal  injuries,  attacks  upon  land,  and 
other  forms  of  poverty,  old  age  pensions  and  methods  of  public  edu- 
cation furnish  typical  examples." 

Here  we  desire  to  call  your  attention  particularly  to  what  the 
author  has  to  say  with  reference  to  Employers'  Liability  Acts. 

"The  first  Workingmen's  Compensation  and  Employers'  Lia- 
bility Acts  were  tentative  steps,  but  laws  quickly  followed  extending 
the  liability  and  reducing  the  defenses,  particularly  in  the  matter  of 


28  NATIONAL     BUSINESS     CONGRESS 

contributory  negligence.  A  law  recently  went  into  effect  making 
every  man  liable  for  an  injury  sustained  by  any  person — not  neces- 
sarily his  servant — while  in  the  house  or  factory,  or  on  his  land  or 
ship,  irrespective  of  any  fault  on  his  part,  and  notwithstanding  the 
contributory  negligence  of  the  injured  person,  unless  the  latter  is 
intentional — suicidal. 

"In  addition,  the  last  Act  created  another  and  unheard  of  form 
of  liability  for  an  employer,  requiring  him  to  compensate  his  serv- 
ant, if  the  latter  falls  ill  or  dies  of  an  'industrial  disease' — a  list  of 
which  diseases  was  appended  to  the  Act — and  with  the  extraordi- 
nary provision  that,  having  paid  the  compensation,  the  employer  may 
sue  any  former  employer  for  the  amount,  if  he  can  prove  the  servant 
actually  contracted  the  complaint  in  the  earlier  service  and  within 
ten  years.  Of  course,  universal  accident  liability  insurance  fol- 
lowed, the  cost  of  which  must  be  borne  by  the  proprietor,  and,  if  he 
is  a  manufacturer,  eventually  by  the  consumer.  As  may  be 
imagined,  such  laws  give  rise  to  surprising  results.  The  report  of 
one  of  the  great  accident  liability  insurance  companies  made  shortly 
after  the  passage  of  this  law  exhibited,  for  example,  the  recovery 
of  damages  by  a  domestic  servant,  who,  while  eating  a  meal,  had 
swallowed  her  own  false  teeth ;  another  had  contrived  to  swallow  a 
curtain  hook ;  a  third  was  burned  by  the  bed  clothes  taking  fire  from 
a  hot  iron  which  she  had  wrapped  in  flannel  for  the  purpose  of 
warming  herself.  A  footman  was  bitten  while  attempting  to  extract 
a  cat  from  the  jaws  of  a  dog;  a  nursemaid  was  burnt  by  letting  off 
fireworks  in  a  back  garden  at  a  private  celebration  of  the  servants 
during  the  master's  absence,  and  a  cook  had  her  eyes  scratched  by 
the  housemaid." 

At  the  present  time  we  are  experiencing  in  America  a  few 
touches  of  the  "Doctrine  of  Collectivism,"  although  it  is  known  by 
a  different  name — Insurgency,  and  in  these  latter  days  "Progres- 
sivism" — and  found  in  both  parties. 

If  any  business  man  here  thinks  that  we  are  going  to  escape,  in 
this  country,  the  experience  which  England  is  going  through,  and 
that  the  politicians  will  overlook  any  precedents  gathered  therefrom, 
he  is  more  optimistic  than  I  am,  and  I  would  recommend  that  he 
form  some  personal  acquaintance  with  the  attitude  of  his  own  legis- 
lators, and,  if  he  does,  I  predict  the  same  surprises  in  store  for  him 
which  the  members  of  the  various  legislative  committees  have  ex- 
perienced, and  that  it  will  be  found  that  there  is  a  game  going  on 


NATIONAL     BUSINESS     CONGRESS  29 

which  is  not  being  conducted  with  a  special  regard  for  the  interests 
which  we  represent,  nor  will  there  by  any  particular  desire  evi- 
denced on  the  part  of  the  political  representatives  to  enlighten  you 
upon  things  going  on  in  the  committees  and  the  lobby.  Not  all  rep- 
resentatives, of  course,  are  thus  disposed.  One  State  Senator  said 
to  a  member  of  my  committee :  "I  have  been  aware  of  the  trend  of 
legislation  for  the  past  ten  years,  or  more.  It  is  time  that  you  and 
the  interests  you  represent  were  waking  up,  and  when  the  present 
legislature  gets  through  with  you,  I  think  that  you  will  be  awake." 
I  liope,  gentlemen,  that  the  senator's  prediction  will  prove  true,  and 
that  business  men,  generally,  have  had  sufficient  adverse  legislation 
to  thoroughly  arouse  them,  though  it  seems  to  take  a  political  earth- 
quake to  bring  us  to  action.  We  have  had  some  shocks  recently, 
and  the  man  with  his  ear  to  the  ground  again  hears  rumblings.  The 
important  question  is,  will  the  business  man  act  in  time  to  avert  the 
political  earthquake  impending? 

Another  phase  of  legislation  which  needs  our  serious  attention 
is  (1)  The  Income  Tax,  state  as  well  as  federal,  (2)  The  Inheritance 
Tax,  and,  in  some  states,  (3)  County  Taxation  on  Foreign  Corpora- 
tions. In  the  State  of  Arkansas,  in  the  County  of  Arkansas,  last 
spring,  the  Board  of  Review  investigated  the  county  records  and 
arbitrarily  taxed  chattel  mortgages,  and  other  evidence  of  indebted- 
ness against  several  foreign  corporations,  notwithstanding  that  they 
were  maintaining  branch  houses  and  paying  personal  property  taxes 
into  the  County  Treasury.  One  of  the  parties  so  taxed,  being  a 
member  of  our  Association,  we  are  now  making  a  test  case  of  same. 

The  attitude  of  labor  and  the  Socialistic  tendencies  with  which 
we  are  confronted,  demand  our  presence  in  the  field  of  politics,  for 
when  the  labor  demagogue  and  his  sympathizer  seek  to  say  to  one 
class  of  citizens,  "You  shall  not  be  employed  without  our  sanction 
and  the  card  of  our  Association,"  and  to  another  class,  "You  shall 
not  employ  labor  that  does  not  submit  to  our  tactics  and  carry  our 
Union  card,"  he  violates  one  of  the  cardinal  and  fundamental  prin- 
ciples of  the  Constitution.  While  recent  events  in  Los  Angeles  have 
clarified  the  labor  situation,  they  emphasize,  rather  than  lessen  the 
necessity  for  the  business  man  in  politics;  for  if,  as  a  result  of  the 
confession  of  the  McNamara  brothers,  the  use  of  dynamite  and 
brute  force  as  a  weapon  of  warfare  is  abandoned,  the  labor  dema- 
gogue will  seek  with  renewed  efifort.  the  enactment  of  class  legisla- 
tion. 


30  NATIONAL     BUSINESS     CONGRESS 

For  some  time  past  this  type  of  lobbyist  has  been  active  in 
nearly  every  state  capitol  and  at  Washington,  and  has  not  hesitated 
in  his  endeavor  to  make  the  power  of  his  organization  felt  on  all 
political  questions,  nor  to  instill  into  the  mind  of  the  politician,  the 
fact  that  he  has  the  votes  with  which  to  back  up  his  demands,  just 
or  unjust. 

While  many  business  men  today  do  not  deny  the  right  of  labor 
to  organize,  nor  object  to  legitimate  unionism,  they  do  object  to  the 
militant  unionism  of  some  leaders  and  their  sympathizers,  just  as 
they  would  object  to  the  church  militant  in  politics.     Neither  the 
one  nor  the  other  has  the  right  to  dominate  the  free  institutions  of 
this  glorious  republic.     That  the  "Labor  Union  Militant"  is  not  an 
idle  term,  many  of  us  who  have  had  experience  in  labor  disputes 
fully  realize,  and  the  public  is  daily  gaining  a  knowledge  of  the  true 
inwardness  of  the  situation,  notwithstanding  the  credulity  of  Mr. 
Gompers.     The  Chicago  Record-Herald,  which  published  a  state- 
ment of  his  being  astounded,  gave  in  the  same  issue  a  list  of  some 
sixty-seven  dynamite  explosions  charged  to  iron  workers,  and  extend- 
ing over  a  period  of  the  past  eight  years.     Had  the  McNamara 
case  been  the  first  instance  in  which  violence  has  been  charged 
against  Unionism,  Gompers'  credulity  might  be  more  easily  under- 
stood, and  accepted  by  a  disinterested  public.     Business  men  who 
have  had  experience  in  strikes  can  tell  of  many  instances  of  violence, 
minor,  of  course,  in  comparison  with  the  dastardly  acts  of  the  Mc- 
Namara brothers,  but  repellent,  nevertheless,  to  the  average,  fair- 
minded  American  citizen ;  and,  while  I  do  not  hold  the  rank  and  file 
of  labor  responsible  for  these  acts  of  violence,  save  by  their  silence 
in  the  past,  and  apparent  lack  of  efifort  to  stamp  them  out,  I  do 
maintain  that  none  but  prejudiced  parties  can  believe  that  the  Mc- 
Namara brothers  acted  of  their  own  volition,  or  at  their  own  expense. 
It  costs  money  to  conduct  secret  destructive  campaigns  such  as  theirs. 
Where  did  this  money  come  from  ?     It  is  significant  that  these  out- 
rages have  been  committed  in  nearly  every  instance   where  there 
has  been  conflict  with  union  labor.     I  sincerely  trust  that  all  guilty 
parties,  whoever  they  may  be,  will  be  discovered  and  brought  before 
the  bar  of  justice.     There  are  no  words  strong  enough  with  which 
to  condemn  the  tinkering  journalist  who,  seeking  to  create  a  public 
sentiment  in  favor  of  cold-blooded  murderers,  publishes  a  statement 
such  as  Lincoln  Stefifens  is  reported  to  have  made:     "They  think 
they  are  serving  a  cause,  that  they  are  fighters  in  a  war;  and  they 


NATIONAL    BUSINESS     CONGRESS  31 

are."  Yes,  a  war  of  anarchy,  but  not  a  war  in  the  interest  of  good 
government,  nor  labor,  nor  of  any  class  of  citizenship.  Fortunately, 
Judge  Bordwell's  denial  of  the  part  which  Steffens  claimed  to  have 
played,  has  consigned  him,  to  use  Grover  Cleveland's  phrase,  to  in- 
nocuous desuetude,  and  there  we  may  let  him  rest.  I  feel  that  this 
country  owes  a  debt  of  gratitude  to  District  Attorney  Frederickson, 
and  to  Judge  Bordwell,  and  that  their  names  will  go  down  in  history 
in  the  annals  of  jurisprudence  of  this  country.  The  men  who  lost 
their  lives  are  the  martyrs,  and  the  sympathy  of  the  public  should  go 
out  to  their  families  and  friends. 

If  the  incidents  to  which  I  have  just  referred  have  not  stripped 
the  mask  from  the  labor  demagogue  and  his  sympathizer  and  al- 
lowed the  public  to  realize  fully  what,  in  the  minds  of  many  thinking 
men,  has  been  the  animus  back  of  their  pernicious  activity,  namely 
to  rule  or  to  ruin,  then  let  the  campaign  of  education  continue  until 
the  public  is  fully  awake. 

Trade  unionism,  in  its  system  of  apprentices,  is  thoroughly  un- 
patriotic. To  illustrate :  In  order  to  increase  the  wages  of  a  com- 
paratively small  number  of  men — small  in  comparison  to  the  vast 
army  outside  the  ranks  of  unionism — they  limit  the  number  of  boys 
or  men  in  their  respective  trades  to : 

In  the  Carpenters'  trade,  1  to  10. 

Marble  Cutters,  1  to  10. 

Moulders,  1  to  8. 

Printers,  1  to  5. 

Plumbers  practically  admit  no  apprentices,  but  have  what 
are  called  "helpers." 

Plasterers  ballot  for  each  apprentice,  and  experience,  it  is 
explained,  shows  that  nearly  every  one  is  black-balled. 

The  efifect  of  this  is  that  the  labor  union  is  maintaining  a  first- 
class  monopoly  in  restraint  of  trade,  and,  in  order  to  divert  tlie 
public  mind  from  their  monopoly,  they  are  loud  in  their  denuncia- 
tion of  capital  and  trusts.  Capital  may  have  many  sins  to  answer 
for,  but  it  has  not  yet  been  guilty  of  such  a  selfish,  vicious,  and 
short-sighted  policy  as  that  of  closing  the  industrial  avenues  to  the 
growing  youth  of  this  country. 

In  New  York  state  alone,  statistics  show  that  there  are  about 
150,000  boys  between  the  ages  of  16  and  20  loafing.  Such  a  condi- 
tion ought  not  to  exist,  and  business  men  cannot  shirk  their  respon- 
sibility for  resultant  conditions  if  this  is  allowed  to  continue. 


32  NATIONAL     BUSINESS     CONGRESS 


It  is  no  wonder  that  Mr.  Gompers  and  his  associates  are  now 
seeking  to  have  the  labor  unions  exempt  from  the  provisions  of  the 
Sherman  Anti-trust  Act,  and  that  Mr.  Hughes,  of  New  Jersey,  rep- 
resenting the  demands  of  organized  labor,  proposes  to  exempt  agri- 
cultural, horticultural  and  labor  combinations  from  the  provisions  of 
the  Sherman  Act. 

Somewhat  in  connection  with  this  there  is  an  excellent  editorial 
in  the  Chicago  Tribune  of  December  4th,  headed,  "Healthy,  Good- 
tempered  Boys."  It  is  too  long  to  embody  in  this  address,  but  I 
recommend  those  who  have  not  read  it  to  do  so. 

It  has  been  my  aim  to  present  for  your  consideration  and  analy- 
sis certain  phases  of  the  present  state  and  national  situation  pointing 
to  the  necessity  of  the  business  man  in  politics.  I  understand  there 
is  to  be  a  free  discussion  upon  this  floor,  and  I  wish  to  present,  in 
closing,  recommendations  relative  to  a  general  line  of  policy  which 
may  be  pursued.  As  specific  issues  are  taken  up  for  discussion, 
issues  such  as  the  Sherman  law,  its  amendment  or  repeal,  a  national 
incorporation  law,  or  a  federal  license  law,  and  other  kindred  issues, 
we  shall  find  much  difference  of  opinion  and  difficulty  in  unanimity 
of  action,  but  my  recommendation  is  that  we  endeavor  as  a  result  of 
our  deliberations  to  evolve  a  concrete  business  policy,  which  shall  be 
sufficiently  broad  in  its  scope  to  constitute  a  business  platform  upon 
which  business  men  will  rally,  and  for  which  they  will  fight  to  the 
extent  of  having  it  inserted  in  a  plank  in  the  platforms  of  both 
political  parties.  President  Taft,  in  his  Olympia  speech,  said  re- 
cently :  "It  is  certainly  hard  to  determine  these  days  who  is  a  Re- 
publican and  who  is  a  Democrat."  And  the  average  business  man, 
as  he  listens  to  the  present  day  doctrine  of  Republicanism  or  De- 
mocracy, often  wonders  if  the  one  is  not  slipping  to  the  saddle  of  the 
donkey  and  the  other  climbing  the  tail  of  the  elephant.  I  recom- 
mend, therefore,  a  business  man's  platform  to  be  inserted  as  a  plank 
in  the  platform  of  each  political  party  in  order  that  our  forces  may 
not  be  split  into  parties  and  groups,  and  for  the  further  reason 
that,  since  the  issues  of  the  day  are  being  dealt  with  in  much  the 
same  way  by  both  parties,  we  are  the  target  for  both. 

We  may  have  confidence  in  the  ultimate  success  of  our  en- 
deavor to  form  a  business  platform  from  the  fact  that  some  20,000 
bankers,  at  their  recent  meeting  in  New  Orleans,  reached  an  agree- 
ment on  an  important  question,  the  plan  for  a  Central  Reserve  As- 


NATIONAL     BUSINESS     CONGRESS  33 

sociation,  and  I  suggest  that  this  may  be  one  issue  on  which  we  can 
agree  and  take  as  one  of  our  planks. 

As  a  final  result  of  our  deliberations,  gentlemen,  I  hope  that  we 
shall  evolve  a  policy  sufficiently  broad  in  scope  to  unite  the  business 
men,  and  keep  us  safely  building  upon  the  foundation  structure  of 
our  Constitution,  as  opposed  to  the  quicksands  of  many  of  the  pres- 
ent day  political  theories.  I  am  not  among  those  who  think  we  have 
outgrown  the  Constitution.  The  words  of  Alexander  Hamilton  are 
still  pertinent,  and  might  well  have  been  written  on  the  conditions 
of  today  instead  of  those  of  130  years  ago.  He  says  in  one  of  his 
Federalist  papers :  "A  dangerous  ambition  more  often  lurks  behind 
the  specious  mask  of  zeal  for  the  rights  of  the  people  than  under  the 
forbidden  mask  of  zeal  for  the  firmness  and  efficiency  of  govern- 
ment. History  will  teach  us  that  the  former  has  been  found  a 
much  more  certain  road  toward  the  introduction  of  despotism  than 
the  latter,  and  of  those  men  who  have  overturned  the  liberties  of 
republics,  the  greatest  number  have  begun  their  career  by  paying 
obsequious  court  to  the  people,  commencing  demagogues  and  ending 
tyrants." 

Thus  in  the  words  just  quoted  does  Hamilton  uncover  to  us  as 
we  heed  it  an  old  new  danger.  We  have  become  so  accustomed  to 
the  present  day  political  demagogue  that  we  have  grown  careless 
and  heedless  of  his  warning  that  the  demagogue  of  today  may  be- 
come the  tyrant  of  tomorrow.  It  is  my  deep-seated  conviction  that 
the  welfare  of  this  republic  demands  now  the  steadying  hand  of  the 
man  of  intelligence  and  affairs,  and  therefore  this  appeal  is  made  for 
the  business  man  in  politics,  and  is  directed  to  man,  not  interests,  to 
the  men  of  this  country — in  the  broad  sense  of  Bobby  Burns,  "A 
man's  a  man  for  a'  that  and  a'  that" ;  in  that  broad  sense  of  Henry 
George  when  he  said :  'T  am  for  men" ;  in  the  broad  sense  of  David 
Hill  when,  in  dealing  with  the  ideal,  he  once  said,  "I  am  a  Demo- 
crat." And  in  the  still  greater  and  broader  sense  in  which  each 
and  every  one  of  us  may  say,  "I  am  an  American,  standing  for  the 
traditions  of  my  forebears  and  the  constitution  for  a  greater  and 
nobler  republic." 
(Applause.) 

The  Chairman  :  Is  there  any  discussion  desired,  gentlemen, 
on  the  subject  of  this  last  address?  If  not,  we  will  proceed  to  the 
next. 


34  NATIONAL     BUSINESS     CONGRESS 

Mr.  Durand:  Mr.  President,  is  it  generally  understood  about 
that  discussion,  whether  each  paper  is  to  be  discussed  immediately 
after  it,  or  set  apart  a  certain  time  for  the  discussion  of  the  differ- 
ent subjects,  allowing  so  much  for  each? 

The  Chairman:  My  idea  was,  Mr.  Durand,  to  give  both  op- 
portunities. It  seems  to  me,  gentlemen,  that  if  there  is  any  discus- 
sion to  take  place  in  connection  with  these  subjects,  that  it  ought  to 
be  done  as  we  go  along;  that  is  my  judgment.  But  in  this  particular 
instance  there  does  not  seem  to  be  any  desire  to  discuss  the  subject. 
Therefore,  we  will  proceed  to  the  next  subject. 

One  of  the  most  important  subjects  which  we  have  on  our  list 
for  discussion  is  that  of  Merchant  Marine.  When  I  say  Merchant 
Marine,  I  mean  Merchant  Marine  which  will  fly  the  flag  of  the 
United  States.  One  of  our  Board  of  Directors  has  devoted  a  great 
amount  of  time  and  study  to  this  subject,  and  he  is  here  this  after- 
noon to  give  you  the  result  of  his  study,  and  his  views.  Ladies  and 
gentlemen,  Mr.  Rosenthal.     (Applause.) 


HOW  TO  GET  A  MERCHANT  MARINE. 


By  Benjamin  J.  Rosenthal. 


Mr,  Chairman  and  Gentlemen : 

At  the  outset  I  want  to  place  before  you  a  few  pungent  facts, 
so  that  you  may  better  follow  my  remarks. 

Our  foreign  trade  amounts  to  over  $3,500,000,000  annually. 
About  ninety-three  per  cent  of  it  is  carried  by  foreign  ships.  These 
ships  belong  to  conferences,  pools  or  combines.  There  is  no  compe- 
tition. Rates  are  fixed  abroad  by  agreement,  and  the  United  States 
is  terribly  discriminated  against  by  this  combine.  Our  commerce  is 
absolutely  at  its  mercy.  In  order  to  appreciate  the  gravity  of  this 
situation  I  suggest  that  you  read  the  Congressional  Record  contain- 
ing the  speech  of  the  Honorable  William  E.  Humphrey  in  the  Sixty- 
first  Congress,  and  study  the  exhibits  that  he  presented  to  Congress, 
showing  the  discrimination  against  the  United  States  by  this  foreign 
conference,  or  pool,  and  showing  the  tremendous  power  which  this 
pool  possesses.  Not  only  does  this  foreign  conference  fix  the  rates, 
but  it  furnishes  the  United  States,  especially  for  its  South  American 


NATIONAL     BUSINESS     CONGRESS  35 


export  business,  the  worst  of  its  ships,  slow  and  antiquated,  and 
this  accounts  in  a  large  measure  for  the  fact  that  the  European  coun- 
tries sell  so  many  more  goods  in  South  America  than  we  do,  for 
the  finest  vessels  that  run  between  here  and  South  America  make 
but  thirteen  knots  an  hour  and  take  about  a  month  to  go  from  New 
York  to  Buenos  Ayres,  and  aside  from  that  the  rate  established  by 
the  conference  for  this  miserable  service  is  considerably  higher  than 
that  between  Europe  and  South  America  in  up-to-date  vessels.     A 
merchant  in  South  America  sending  an  order  to  us  cannot  possibly 
get  delivery  within  three  months,  hence  he  sends    his    orders    to 
Europe,  where  he  can  get  prompt  service.    Notwithstanding  that  the 
same  conference  operates  and  controls  both  lines  of  steamships,  we 
get  the  very  worst  at  the  highest  rate.     If  you  will  look  over  the 
sailing  lists  of  vessels  from  the  United  States  to  Buenos  Ayres  and 
from  Europe  to  the  same  place  you  will  be  appalled  at  the  situation. 
If  a  South  American  wants  to  come  to  the  United  States,  how  does 
he  come?    Why,  by  way  of  Europe.    And  why  does  he  go  first  to 
Europe  to  get  to  us  ?    Because  he  can  get  here  by  going  via  Europe 
more  quickly  and  in  a  first-class  steamer.     By  the  time  he  arrives 
he  has  bought  most  of  his  goods  abroad.     How  can  we  ask  a  mer- 
chant down  there  to  respect  us  when  he  hardly  knows  we  exist,  for 
not  a  single  American  steamship  is  now  running  on  any  of  the  long 
routes  to  South  America  ?    It  is  getting  so  now,  that  American  manu- 
facturers, in  order  to  meet  this  difficulty,  are  establishing  factories 
in  Europe  so  as  to  compete  with  the  foreigner  in  getting  the  South 
American  trade,  shipping  from  Europe  to  South  America.     Is  not 
this  a  ridiculous  situation?    And  the  foreign  steamship  trust  is  re- 
sponsible for  these  conditions,  and  we  sit  supinely  by  and  allow  this 
plundering  to  continue.     And  then  we  hold  Pan-American  confer- 
ences and  ask  the  South  American  why  he  does  not  patronize  us 
more  liberally ! 

The  records  show  that  these  pools  have  steadily  increased  the 
freight  rates  from  the  United  States  to  foreign  ports  more  than  five 
hundred  per  cent  in  some  instances.  They  have  been  known  to 
bring  a  cargo  from  Europe  to  Seattle  for  $1.50  a  ton  and  then  de- 
mand $6.90  for  a  return  cargo  between  the  same  points,  because  the 
conference  had  fixed  that  rate,  and  if  they  could  not  get  it  the  ship 
was  obliged  to  go  back  empty  handed.  These  facts  may  be  dis- 
puted, but  the  records  are  on  file  in  Washington  and  cannot  be  de- 
nied.    We  have  American  lines  in  the  Pacific  to  which  we  pay  a 


36  NATIONAL     BUSINESS     CONGRESS 

ship  subsidy,  and  the  evidence  even  shows  that  these  Hnes,  prob- 
ably in  self-defense,  have  been  obliged  to  join  these  conferences. 

Who  are  the  principal  stockholders  of  this  giant  ship  combine, 
the  greatest  combination  in  the  world  ?  Why,  the  big  European  ship- 
pers, of  course.  And  do  you  blame  them  for  trying  to  stifle  Ameri- 
can competition  by  establishing  discriminatory  rates  and  by  giving 
us  the  worst  and  slowest  ships  ? 

The  world  today  is  engaged  in  a  commercial  war,  and  the  great- 
est nation  will  be  the  one  that  is  most  extensively  engaged  in  trade, 
for  a  nation  that  neglects  this  important  feature  cannot  long  remain 
a  first-class  nation.  This  country  is  undoubtedly  the  richest  in  the 
world.  We  have  greater  natural  resources  and  we  have  more  to 
sell  than  any  other  nation,  and  to  keep  our  great  country  at  the  front 
we  must  first  of  all  protect  it  commercially.  This  nation  should 
always  be  the  greatest  commercial  nation  in  the  world.  This  gov- 
ernment is  justified  in  resorting  to  every  honorable  means  to  main- 
tain that  position,  and  so  long  as  it  is  maintained  we  need  have  no 
fear  of  the  country's  safety  or  of  its  progress.  Our  flag  today  is 
but  a  memory  outside  of  this  country.  We  pay  nearly  a  million  a 
day  to  foreign  ships  for  carrying  our  commerce.  We  have  over  a 
hundred  thousand  less  tons  of  shipping  engaged  in  over-sea  com- 
merce than  we  had  one  hundred  years  ago  when  our  nation  was 
scarcely  recognized.  What  we  need — and  I  am  sure  there  is  no  one 
within  the  sound  of  my  voice  who  will  dispute  it — is  direct  and 
regular  lines  of  communication  between  our  nation  and  other  na- 
tions; and  these  lines  must  be  controlled  by  our  nation,  so  that  no 
discrimination  can  possibly  be  made  against  us ;  and  they  must  carry 
our  flag.  When  this  is  accomplished  our  foreign  commerce  will 
jump  by  leaps  and  bounds  and  our  prestige  abroad  will  be  greatly 
enhanced.  Every  ship  of  our  nation  touching  the  shores  of  a  for- 
eign country  will  advertise  us. 

The  history  of  the  commercial  progress  of  foreign  nations — 
and  this  means  of  their  progress  and  greatness  among  nations,  for 
any  nation  that  is  commercially  great  is  progressive  in  other  direc- 
tions— dates  from  the  time  when  they  established  their  own  means 
of  communication  wnth  other  nations.  You  may  say,  zve  have  made 
great  progress,  despite  this  handicap,  but  who  can  say  what  our  posi- 
tion would  have  been  today  had  we  kept  pace  with  our  merchant 
mf rine  ?  And  if  we  study  the  history  of  the  progress  of  civilization 
we  will  find  that  an  increase  of  commercial  relationship  was  the 


NATIONAL     BUSINESS     CONGRESS  Zl 

immediate  result,  where  lines  of  communication,  whether  by  steam- 
ship or  rail,  were  established.  I  need  not  convince  any  thoughtful 
man  of  this  fact.  And  where  communication,  once  established,  was 
discontinued,  disintegration  immediately  set  in. 

Trade  has  unquestionably  followed  the  flag,  as  orders  follow 
the  traveling  man.  We  have  vast  fields  of  production,  and  now  we 
must  get  these  products  to  the  bases  of  consumption.  So  far  we 
have  been  most  fortunate,  owing  to  our  great  and  unlimited  re- 
sources and  our  great  energy.  We  have  been  able  to  hold  our  own 
with  foreign  countries,  even  with  the  handicap  of  paying  higher 
freight  rates  than  our  foreign  competitors.  But  our  foreign  com- 
petitors are  also  awake  and  getting  stronger  each  day.  After  all  is 
said,  I  still  claim  that  with  the  same  facilities  that  Germany  or  Eng- 
land or  even  Japan  has  for  shipping  merchandise,  the  commerce  of 
our  nation  would  have  developed  in  proportion  to  the  expansion  of 
communication  of  our  own  ships  with  foreign  countries. 

Some  may  say,  "Let  well  enough  alone,"  but  we  are  never  well 
enough,  if  when  a  little  wave  of  depression  hits  us  in  our  own  coun- 
try we  are  obliged  to  retrench  and  shut  down  shops  and  throw 
thousands  of  people  out  of  work,  when  we  might  just  as  well  be  kept 
busy  supplying  the  nations  of  the  world  from  our  abundant  re- 
sources. Whenever  you  find  a  business  man  who  says,  "Let  well 
enough  alone,"  you  find  one  who  is  standing  still,  asleep,  and  when 
he  awakes  and  wants  to  run,  his  competitors  are  so  far  ahead  of  him 
that  he  cannot  overtake  them. 

We  are  building  a  canal  that  will  cost  over  $400,000,000,  and 
make  shorter  routes  for  foreign  ship  owners  to  become  richer,  and 
by  shortening  the  distance  we  just  increase  the  competition  we  now 
have,  by  enabling  foreign  bottoms  to  save  at  least  one-third  on  their 
coal  bills,  making  three  trips  where  they  formerly  made  two ;  and 
even  now  foreign  countries  are  building  larger  and  better  ships  to 
capture  more  of  the  trade  with  South  America,  as  soon  as  the  canal 
which  we  are  building  is  opened.  And  we  sit  idly  by,  and  ask  the 
South  American  why  he  does  not  do  more  business  with  us !  The 
shame  of  it ! 

If  we  had  the  ships  we  could  easily  have  most  of  the  trade  on 
the  entire  west  coast  of  South  America,  which  is  now  controlled  by 
Europe,  for  with  the  new  canal  we  will  be  from  2,000  to  3,000  miles 
nearer  there  than  Europe  is.  But  of  what  avail  will  this  be,  if  we 
have  not  the  ships  to  send  there  ?    The  southern  cotton  grower,  the 


3S  NATIONAL     BUSINESS     CONGRESS 

eastern  and  western  manufacturers,  all  would  alike  be  benefited  by 
this  great  route  shortener,  if  we  only  had  the  ships.  Think  what  any 
of  our  transcontinental  railroads  would  pay  to  shorten  the  distance 
from  coast  to  coast  by  one-third,  and  what  it  would  mean  in  the 
saving  of  freight  rates  to  this  nation ! 

In  1910  we  shipped  $100,000,000  to  South  America.  Why,  the 
Argentine  Republic  alone  bought  that  many  goods  in  the  same  pe- 
riod from  Great  Britain,  so  you  see  how  infinitesimally  and  pitifully 
small  are  our  exports  to  South  America,  a  market  that  belongs  to 
us.  as  compared  with  those  of  Europe. 

South  America  produces  many  raw  materials  and  food  prod- 
ucts, such  as  sugar,  coffee,  rubber,  hides  and  wool,  which  we  need, 
and  we  could  supply  them  with  many  of  the  necessaries  of  life  and 
manufactured  goods,  so  that  we  could  send  a  shipload  down  there 
and  bring  a  shipload  back,  and  all  we  need  is  our  own  ships  to  carry 
them.  Then  we  could  make  a  freight  rate  to  our  manufacturers  to 
encourage  them  to  compete  with  foreign  manufacturers,  and  to  pre- 
vent any  discrimination  against  them,  and  we  would  also  extend  this 
low  freight  rate  to  South  Americans  to  encourage  them  to  trade 
back  with  us. 

I  will  give  you  a  slight  idea  of  the  imports  of  some  of  the 
South  American  republics — Brazil,  Uruguay  and  Argentine,  three 
countries  on  the  east  coast  of  South  America;  Argentine,  with 
6,000,000  people,  imports  merchandise  valued  at  over  $300,000,000 ; 
Uruguay,  with  1,200,000  people,  $40,000,000;  Brazil,  with  20,000,- 
000  people,  $180,000,000,  or  a  total  of  over  half  a  billion,  and  nearly 
all  of  these  imports  could  and  should  come  from  us,  whereas  only 
about  ten  per  cent  come  from  us  and  the  balance  from  Europe.  This 
condition  would  change  very  quickly  if  about  $20,000,000  were 
immediately  expended  for  first-class  merchant  vessels,  sailing  the 
American  flag,  plying  between  these  ports,  and  this  half  a  billion  of 
commerce  annually  would  begin  to  turn  our  way  very  quickly.  As 
business  men  you  will  readily  see  that  this  is  a  good  commercial 
investment,  aside  from  the  protective  feature. 

Now  take  the  west  coast :  Chili  has  a  population  of  3,400,000, 
and  imports  about  $100,000,000;  Peru  has  a  population  of  4,500,- 
000,  and  imports  about  $30,000,000,  and  less  than  ten  per  cent  of 
these  imports  come  from  the  United  States.  Yet  for  all  of  the  com- 
merce which  we  now  have  with  all  of  these  countries,  either  on  the 


NATIONAL     BUSINESS     CONGRESS  39 


west  or  the  east  coast  of  South  America,  we  are  dependent  today 
absolutely  on  foreign  ships. 

Before  I  leave  the  commercial  aspect,  I  want  to  give  you  a  few 
more  statistics.  England  transports  over  ninety  per  cent  of  her 
commerce  in  her  own  ships,  Germany  over  fifty  per  cent,  France 
about  thirty  per  cent,  and  the  United  States  about  seven  per  cent. 
England,  with  about  $5,000,000,000  of  commerce,  has  a  ship  ton- 
nage of  about  20,000,000  tons.  Germany  with  about  $4,000,000,000, 
has  about  4,500,000  tons,  and  the  United  States,  with  over  $3,500,- 
000,000,  has  less  than  1,000,000  tons,  and  even  little  Norway,  with 
less  than  $200,000,000,  has  a  tonnage  twice  as  great  as  the  United 
States.  Prior  to  the  year  1800  we  had  a  tonnage  almost  as  great  as 
we  have  today,  and  eighty  years  ago  ninety  per  cent  of  our  foreign 
commerce  was  carried  in  our  own  vessels. 

We  have  ten  regular  ocean  going  steamships.  Great  Britain  has 
about  eighty-five  hundred,  and  fifty  years  ago  we  rivaled  her.  Out 
of  three  hundred  ships  passing  through  the  Suez  Canal  in  1909  we 
had  one.  Mr.  Charles  H.  Sherrill,  United  States  Minister  to  Argen- 
tine, states  that  in  eighteen  months  he  saw  only  one  American  flag 
and  that  was  on  a  man-of-war.  Out  of  4,332  vessels  entering  the 
port  of  Buenos  Ayres  in  1909  only  four  had  our  flag,  and  they 
were  lumber  schooners.  The  money  that  we  get  for  our  exports  in 
excess  of  our  imports  we  pay  right  back  to  foreign  ship  owners  in 
the  way  of  freight.  If  you  want  foreign  powers  to  respect  you,  just 
let  them  see  your  ships  entering  their  ports  carrying  your  flag  and 
loaded  down  with  your  merchandise.  If  we  had  a  respectable  mer- 
chant marine  our  shipping  would  soon  reach  tremendous  propor- 
tions and  our  railroads  could  make  lower  freight  rates  to  carry  our 
merchandise  across  the  continent  for  export,  for  the  great  additional 
volume  of  business  would  enable  them  to  do  so  with  even  a  greater 
profit.  All  of  this  would  not  only  increase  materially  the  prosperity 
of  our  country,  but  would  reduce  the  cost  of  living,  for  our  manu- 
facturers with  a  greatly  increased  business  could  turn  out  this  addi- 
tional product  with  but  little  increase  in  overhead  and  thus  could 
manufacture  more  cheaply,  and  instead  of  shutting  down  valuable 
plants  in  times  of  stress  and  throwing  them  on  the  scrap  heap,  we 
could  use  all  these  enterprises  that  took  so  many  years  to  build  up. 

I  am  sorry  that  I  have  taken  so  much  of  your  time  with  sta- 
tistics in  my  endeavor  to  show  the  desirability,  from  a  commercial 
standpoint,  of  a  merchant  marine.     I  do  not  think  I  have  changed 


40  NATIONAL     BUSINESS     CONGRESS 

the  opinion  of  a  single  individual  on  that  point,  for  I  am  sure  that 
every  one  who  has  paid  even  scant  attention  to  the  subject  was  con- 
vinced long  before  he  entered  this  hall  that  a  merchant  marine  is 
absolutely  necessary  to  protect  the  commercial  welfare  of  this 
country. 

There  is  another  and  even  more  important  reason  why  we 
should  have  a  merchant  marine,  and  this  reason  afTects  very  mate- 
rially the  safety  of  this  nation.  This  may  seem  a  broad  statement, 
but  I  am  reminded  of  a  paragraph  in  a  speech  in  Congress  when 
the  subject  of  a  merchant  marine  was  under  discussion,  and  one  of 
the  members  of  Congress  said  that  if  we  were  ever  engaged  in  a 
war  the  first  thing  we  should  do  would  be  to  destroy  our  navy,  so 
that  the  enemy  could  not  capture  it  and  use  it  to  destroy  us.  This 
was  naturally  laughed  at,  but  I  am  wondering  whether  under  the 
present  conditions  this  Congressman  was  so  far  off.  Let  us  analyze 
this  phase  of  the  situation. 

Our  present  navy  consists  of  about  225  warships,  including  6 
transports,  7  supply  ships  and  2  hospital  ships.  We  have  19 
colliers,  with  a  total  cargo  capacity  of  75,000"  tons.  Assume  that 
we  become  engaged  in  war,  the  seat  of  which  is  3,000  miles  from 
our  nearest  station ;  it  can  readily  be  seen  how  helpless  we  would  be 
with  but  two  hospital  ships,  six  transports  and  seven  supply  ships. 
The  Admiral  of  our  Navy,  as  President  of  the  General  Board,  in 
a  report  to  Congress  says  that  "in  time  of  war  the  great  need  of 
auxiliary  vessels  is  immediately  felt  by  both  the  army  and  navy, 
and  the  existence  of  a  large  fleet  of  American-owned  vessels,  avail- 
able at  once  for  conversion  into  transports  or  supply  ships,  would 
undoubtedly  be  of  great  importance  in  expediting  the  departure  of 
troops  and  in  supplying  them  after  departure.  These  vessels  could 
be  used  as  scouts,  colliers,  ammunition  ships,  supply  and  refriger- 
ating, distilling  and  hospital  ships,  repair  and  torpedo  depot  ships, 
transports,  dispatch  vessels  and  tugs.  The  most  important  service 
that  a  merchant  marine  could  accomplish  would  be  for  scout  pur- 
poses, when  the  sea  could  be  kept  and  good  speed  made.  One  ves- 
sel for  this  purpose  would  be  needed  for  each  battleship.  The  navy 
would  need  a  number  of  colliers  of  at  least  5,000  tons  and  with 
ifcfificient  speed  and  steaming  radius  to  enable  them  to  accompany 
a  squadron  of  battleships.  There  should  be  five  such  colliers  for 
each  squadron  of  eight  battleships  with  its  attending  cruisers.  A 
number  of  colliers  of  less  speed  and  carrying  capacity  would  also 


NATIONAL     BUSINESS     CONGRESS  41 

be  needed  for  keeping  the  coal  supply  replenished  at  the  various 
coal  depots,  and  for  other  purposes.  Ammunition  ships  of  about 
4,000  tons  carrying  capacity  would  be  required  for  the  purpose  of 
replenishing  the  ammunition  supply  of  the  fleet  with  reserve  ammu- 
nition in  case  of  contemplated  action.  There  should  be  one  such 
vessel  for  each  squadron  of  eight  battleships  with  its  attending 
cruisers.  A  number  of  transports  would  also  be  needed  by  the 
Navy  Department  for  the  transportation  of  a  force  of  marines  for 
the  establishment  and  defense  of  advanced  naval  bases.  Each  trans- 
port should  be  capable  of  carrying  at  least  one  battalion  of  marines 
with  complete  outfit  of  field  and  camp  equipage. 

"Another  benefit  which  would  accrue  to  the  navy  from  a  large 
fleet  of  American-owned  merchant  vessels  would  lie  in  the  large 
number  of  experienced  sea-going  men,  engineers  and  firemen,  accus- 
tomed to  marine  engines  and  boilers,  who  would  form  a  valuable 
reserve  from  which  to  draw  the  men  for  manning  the  auxiliaries." 

I  have  just  (luoted  the  exact  words  of  Admiral  Dewey.  This  is 
not  only  his  sentiment,  but  I  believe  it  echoes  the  thought  of  every 
man  in  the  navy  who  has  given  this  subject  any  study.  Admiral 
Sperry  says  that  in  the  cruise  of  the  American  fleet  around  the 
world :  "I  did  not  once  see  a  merchant  ship  flying  our  country's 
flag.  We  had  to  depend  upon  foreign  colliers,  and  when  they  failed, 
had  to  buy  coal  at  high  prices." 

President  Taft  says  that  "if  w^e  were  compelled  to  go  into  a 
war  today,  our  merchant  marine  lacks  altogether  sufficient  tonnage 
of  auxiliary  unarmed  ships  necessary  to  the  proper  operation  of  the 
navy." 

I  might  keep  you  here  all  night  quoting  from  very  responsible 
authorities  along  this  same  line,  to  show  the  weakness  of  our  pres- 
ent navy  in  this  connection.  During  the  brief  engagement  of  the 
Spanish-American  war,  we  were  compelled  to  go  out  and  buy  ships 
to  augment  our  navy,  and  pay  ridiculous  prices,  taking  whatever  we 
could  get.  But  today  we  could  not  even  do  this  in  case  of  war, 
owing  to  the  treaties  which  most  of  the  nations  now  have  with 
each  other.  What  right  have  we  to  build  any  more  great  battle- 
ships, when  we  do  not  provide  the  auxiliaries  which  are  so  essential 
to  them  ?  The  way  we  are  equipped  at  present,  we  have  enough 
auxiliaries  for  two  squadrons  of  eight  battleships,  and  so  the  bal- 
ance of  our  navy  would  be  practically  useless  if  we  could  not  pur- 
chase auxiliaries,  which  is  quite  unlikely.     Therefore  the  statement 


42  NATIONAL     BUSINESS     CONGRESS 


that  I  quoted  previously,  of  one  of  the  Congressmen,  that  in  case  of 
war  we  would  better  destroy  our  battleships  to  prevent  the  enemy 
from  capturing  them  and  using  them  against  us  does  not  seem  so 
ridiculous,  if  we  analyze  the  true  situation.  Not  only  have  we  no 
auxiliaries  for  our  navy,  but  we  have  no  transports  for  our  army. 

Now,  what  is  the  condition  today?  We  are  paying  out  mil- 
lions to  train  foreign  seamen  and  build  auxiliary  ships  for  our 
enemies  to  use  against  us  in  time  of  war,  instead  of  training  our 
own  seamen  and  building  our  own  ships.  The  American  sailor  is 
practically  extinct  because  we  have  practically  no  merchant  marine. 
We  cannot  even  get  seamen  for  our  present  navy,  notwithstanding 
we  are  offering  more  inducements  than  ever  and  are  advertising 
for  seamen  all  over  the  country.  And  I  will  tell  you  why  this 
condition  exists.  The  life  on  a  battleship  after  the  excitement  of 
the  first  few  months  has  worn  off  is  most  desultory  and  unattrac- 
tive. It  is  entirely  too  monotonous  and  the  men  are  too  long  away 
from  home.  There  is  plenty  of  discipline  but  no  action,  and  men 
who  go  to  sea  usually  go  to  get  excitement,  and  they  soon  become 
disappointed  and  dissatisfied. 

During  the  Boer  war  the  merchant  marine  of  England  was  of 
inestimable  value.  How  quickly  she  transported  an  army  down 
there !  The  seamen  and  officers  on  her  merchant  marine  were  well 
trained  and  there  was  scarcely  a  moment's  delay.  The  ships  were 
quickly  converted  into  auxiliary  cruisers  and  sent  down  to  Africa. 
Russia's  defeat  by  Japan  was  surely  attributable  to  her  lack  of  a 
merchant  marine,  and  she  and  the  United  States  are  the  only  great 
nations  that  lack  a  suitable  merchant  marine.  It  was  Japan's  mer- 
chant marine  that  so  quickly  transported  the  vast  army  into  Man- 
churia, and  even  America  used  to  great  advantage  the  few  ships 
she  impressed  into  service  during  the  Spanish-American  war.  Why," 
today  we  are  even  dependent  upon  foreign  steamships,  which  are 
the  auxiliary  cruisers  of  foreign  navies,  for  the  means  of  com- 
municating the  instructions  of  our  government  to  our  military  and 
civil  authorities  in  the  Philippines ! 

I  feel  that  I  am  wasting  your  time  with  all  these  details  which 
are  intended  to  show  you  the  necessity  of  a  merchant  marine,  both 
for  the  commerce  and  for  the  safety  of  our  nation,  and  I  think  that 
what  you  wish  to  know  is,  what  remedy  I  can  propose  to  meet  the 
situation. 


NATIONAL     BUSINESS     CONGRESS 43 

First,  I  shall  touch  briefly  upon  the  remedies  already  proposed 
during  the  last  quarter  of  a  century  while  this  subject  has  been 
under  the  serious  consideration  of  our  nation. 

Three  plans  have  been  exploited,  known  as  the  free  ship,  the 
discriminating  duty,  and  the  ship  subsidy,  and  each  of  these  has 
had  many  followers.  The  free  ship  plan  I  do  not  consider  feasible, 
for  the  reason  that  we  have  practically  free  ships  today,  for  under 
the  Dingley  tariff,  materials  for  the  construction  of  ships  for  for- 
eign commerce  are  admitted  free.  The  reason  especially  that  the 
free  ship  plan  has  not  succeeded  in  building  up  a  merchant  marine 
is  probably  that  foreign  ship  owners  find  it  much  cheaper  to  operate 
ships  under  a  foreign  flag  with  foreign  seamen,  because  the  scale 
of  wages  is  so  much  lower  on  foreign  ships  than  it  is  on  American 
ships,  and  this  reason  was  steadily  advanced  by  ship  builders  when 
Congress  made  an  investigation  of  the  subject  of  free  ships,  and  it 
is  reasonable  to  suppose  that  financiers  who  are  going  to  operate 
a  merchant  ship  will  operate  under  foreign  flags  so  long  as  the  great 
difference  exists  between  wages,  and  even  if  they  were  inclined  to 
be  philanthropists  they  could  not  compete  with  foreign  ship  own- 
ers with  this  great  difference  against  them,  for  the  work  that  sea- 
men do  is  merely  mechanical  and  the  foreign  seamen  can  do  it 
probably  as  well  as  the  American,  if  not  better,  especially  on  account 
of  their  experience.  Merchant  ships  engaged  in  over-sea  commerce 
operating  under  the  American  flag  were  transferred  to  a  foreign 
flag  on  account  of  this  difference  in  wages. 

In  1904  a  Merchant  Marine  Commission  was  appointed  to  in- 
vestigate the  subject  of  a  merchant  marine.  I  have  carefully  read 
the  account  of  this  investigation.  During  the  discussion  of  the  ques- 
tion of  the  effect  of  free  ships,  large  American  investors  in  foreign 
steamships  were  asked  if  they  would  fly  the  American  flag  over 
their  vessels  if  the  United  States  admitted  foreign  built  ships  free 
of  duty,  and  they  answered  they  could  not  afford  to  give  up  the 
advantage  of  cheap  foreign  labor.  This  in  a  nutshell  is  the  answer 
to  the  thought  of  building  up  a  merchant  marine  by  the  free  ship 
plan. 

The  discriminating  duty  plan  suggested  quite  frequently  is  not 
practical,  first  of  all  because  of  our  commercial  treaties  with  thirty 
nations,  which  specifically  prohibit  both  discriminating  custom  duties 
and  tonnage  duties,  and  even  if  we  abrogated  these  treaties  a  year's 
notice  must  be  given.     If  we  did  this,  these  nations  would  unques- 


44  NATIONAL     BUSINESS     CONGRESS 

tionably  retaliate  by  placing  discriminating  duties  on  our  exports  of 
manufactures  and  agriculture.  When  discriminating  duties  were 
practiced  by  our  country  over  a  hundred  years  ago,  we  imported  far 
more  than  we  exported.  Today  the  balance  is  in  our  favor,  so  that 
discriminating  duties  would  be  very  injurious  to  us  and  foreign 
retaliation  would  hurt  us  greatly.  There  is  another  and  a  more 
serious  condition.  About  one-half  of  the  commodities  we  purchase 
and  consume  from  abroad  are  on  the  free  list.  Inasmuch  as  these 
articles  that  are  on  the  free  list  are  principally  foodstuffs  and  raw 
materials,  the  nation  would  never  tolerate  a  discriminating  duty 
being  placed  on  any  of  these  articles,  for  this  would  only  tend  to 
increase  greatly  the  cost  of  living,  for  everybody  knows  that  any 
additional  duty  is  added  to  the  selling  price  to  the  consumer  when 
the  article  is  eventually  sold.  The  proportion  of  articles  imported 
now  on  the  free  list  is  steadily  increasing.  If  a  discriminating  duty 
is  put  only  on  articles  not  on  the  free  list,  it  would  not  be  attractive 
enough  to  encourage  American  shippers  to  engage  more  largely  in 
commerce,  for  with  many  of  the  countries  as  high  as  ninety-eight 
per  cent  of  our  imports  are  articles  now  on  the  free  list. 

I  will  give  you  a  few  statistics  of  our  principal  imports  for 
this  year,  1911 : 

Sugar,  $105,000,000;  chemicals  and  drugs,  $95,000,000;  coffee, 
$84,000,000;  hides  and  skins,  $80,000,000;  India  rubber,  $25,000,- 
000;  cotton  manufactures  and  raw  silk,  each  about  $65,000,000; 
fibre  manufactures,  $55,000,000;  wood  and  manufactures,  $50,000,- 
000;  fruits  and  nuts,  $40,000,000;  block  and  pig  tin,  $40,000,- 
000;  diamonds,  $33,000,000;  copper  manufactures,  unmanufactured 
fibres,  iron  and  steel  manufactures,  silk  manufactures,  leaf  tobacco 
and  oils,  each  about  $30,000,000 ;  art  works,  furs  and  fur  skins  and 
wool,  about  $25,000,000  each. 

The  discriminating  duty  plan  was  also  carefully  gone  over  by 
the  Merchant  Marine  Commission.  Our  treaties  with  other  nations 
contain  important  commercial  clauses  aside  from  the  tonnage  taxes, 
and  to  abolish  them  and  then  re-negotiate  on  terms  as  broad  and  lib- 
eral as  the  present  ones  would  probably  not  only  be  a  formidable 
undertaking,  but  would  take  many  years  to  accomplish.  A  tonnage 
tax  would  only  result  in  the  tax  being  added  to  the  rate  and  an 
increase  in  the  cost  of  the  imported  articles  to  the  consumer.  For 
these  reasons  I  do  not  think  this  country  will  ever  pass  a  law  levy- 


NATIONAL     BUSINESS     CONGRESS  45 

ing  discriminating  duties  on  all  goods  brought  into  this  country  on 
foreign  bottoms,  or  a  tonnage  tax  for  the  same  purpose. 

Niow  the  plan  that  is  generally  admitted  as  infinitely  superior 
to  either  the  free  ship  plan  or  the  discriminating  duty  plan,  and  one 
that  almost  passed  both  Houses  of  Congress,  and  so  came  very 
near  to  being  enacted  into  a  law,  is  the  ship  subsidy  plan.  This  plan 
especially  have  I  given  the  most  careful  and  earnest  consideration, 
if  for  no  other  i-eason  than  the  one  that  many  of  the  best  minds  and 
the  most  experienced  men  of  this  country  during  the  past  quarter 
of  a  century  have  been  firm  advocates  of  this  plan.  If  we  could 
secure  a  merchant  marine  by  no  other  plan  than  that  of  a  ship 
subsidy  I  would  bow  to  the  inevitable  and  accept  it,  so  anxious  am  I 
that  this  country  should  have  at  once  a  merchant  marine,  but  I 
fear  the  Congress  will  never  enact  into  law  the  ship  subsidy,  except 
as  a  last  and  only  resort,  for  the  prejudice  against  this  plan  seems 
to  be  getting  stronger. 

1  am  principally  opposed  to  the  ship  subsidy  because  the  mer- 
chant ships  of  the  world  are  in  the  hands  of  a  gigantic  combina- 
tion, and  so  strong  is  this  combination,  that  it  is  generally  under- 
stood that  even  the  American  ship  subsidized  steamers  on  the  Pa- 
cific have  joined  it  and  are  making  the  rates  for  the  transportation 
of  merchandise  prescribed  by  the  conference ;  so  you  see  that  even 
with  a  subsidy  these  ships  cannot  compete  with  this  pool.  Xow,  if 
we  pass  a  law  giving  a  subsidy  to  certain  ships  operating  under  the 
American  flag,  they  will  operate  only  so  long  as  they  can  compete 
against  this  pool,  and  when  they  cannot,  they  will  either  secretly 
join  this  pool,  or  come  back  to  the  nation  for  an  increased  sub- 
sidy; and  this  might  keep  on  indefinitely,  for  this  trust  could  afford 
to  carry  goods  at  a  loss  where  it  came  into  competition  with  the 
few  ships  that  would  come  out  under  the  subsidy  plan,  for  the 
profits  of  the  trust  are  enormous  and  it  would  never  quit  while  it 
had  a  leg  to  stand  on,  in  its  attempt  to  ruin  its  competitors.  This 
has  been  its  policy  in  the  past,  and  that  is  why  the  ship  owners 
who  were  not  in,  and  who  at  first  refused  to  join,  came  in  finally  in 
self-defense.  Even  if  I  am  wrong  (but  I  do  not  think  I  am)  I  am 
opposed  to  this  nation  paying  out  millions  of  dollars  in  subsidies  for 
a  merchant  marine  that  would  be  under  our  supervision  only  nomi- 
nally," because  I  am  not  convinced  of  the  necessity  for  doing  so. 
The  only  reason  why  T  might  think  well  of  the  ship  subsidy  plan 


46  NATIONAL    BUSINESS     CONGRESS 


is  tliat  it  is  better  than  no  plan  at  all,  and  infinitely  better  than  no 
merchant  marine. 

During  the  debates  on  the  merchant  marine  in  the  United 
States  Senate  in  1908,  the  records  show  that  the  three  steamships 
on  the  Oceanic  Line,  formerly  plying  to  Australia,  at  that  time  were 
laid  up  in  the  harbor  of  San  Francisco,  being  unable,  although  sub- 
sidized for  mails  by  this  government,  to  compete  with  foreign  ves- 
sels. This,  it  seems  to  me,  is  an  unanswerable  argument  against  a 
ship  subsidy. 

There  is  another  reason  why  I  think  we  are  wasting  time,  and 
in  the  end  we  will  accomplish  nothing,  if  we  consider  any  further 
a  ship  subsidy.  It  has  been  consistently  defeated  in  Congress  for 
many  years,  in  the  first  place.  In  the  second  place,  Mr.  B.  N.  Baker, 
of  Baltimore,  who  w^as  formerly  president  of  the  Atlantic  Trans- 
port Company,  which  company  sold  out  to  the  ship  trust,  has  been 
attempting  to  organize  a  new  company  with  fifteen  millions  of 
capital,  to  carry  the  mail  between  the  American  ports  upon  the  com- 
pletion of  the  Panama  Canal.  This  company  was  to  be  independent 
and  free  from  all  alliances  with  railroads,  and  if  it  could  have  been 
floated,  would  have  been  able  to  make  reasonable  ship  rates  for 
transportation  by  taking  advantage  of  the  Panama  Canal.  But  even 
with  Mr.  Baker's  broad  experience  and  splendid  standing  in  the 
steamship  world,  he  had  to  abandon  his  plan,  because  it  was  impos- 
sible for  him  to  raise  the  fifteen  millions  required  to  construct  a 
fieet  of  fifteen  ships,  for  the  financial  powers  who  are  heavily  inter- 
ested in  the  ship  trust  made  it  impossible  for  him  to  raise  the  money. 
Mr.  Baker  is  probably  the  one  man  in  this  country,  outside  of  those 
interested  in  the  ship  trust,  who  might  be  able  to  bring  about  the 
construction  of  an  independent  merchant  marine.  But  even  if  he 
had  succeeded  in  floating  his  enterprise,  I  am  sure  that  it  would 
have  been  only  temporary,  for  the  ship  trust  would  either  gobble  it 
up  as  soon  as  it  began  to  vigorously  compete  with  it.  or  it  would 
force  the  company  to  maintain  the  same  rates. 

Now  as  to  my  proposed  plan.  I  suppose  that  it,  too.  will  re- 
ceive much  opposition.  I  shall  only  ask  that  that  careful  considera- 
tion be  given  it  which  I  have  given  to  the  other  plans  proposed. 
It  has  at  least,  I  think,  the  merit  of  being  a  new  one,  but  I  hope  it 
will  not  be  condemned  on  that  account. 

Our  nation  has  a  naval  organization  comprising  about  3,000 
officers  and  50,000  seamen.     Our  equipment  consists  of  about  225 


NATIONAL     BUSINESS     CONGRESS 47 

battleships.  We  own  the  greatest  water  highway  in  the  world,  the 
finest  seaports  and  docks  and  harbor  facilities  of  any  other  nation, 
as  well  as  the  most  navigable  streams.  Our  ship  yards  are  equipped 
as  well  as  those  of  any  other  nation.  Our  executive  department  is 
thoroughly  organized,  and  consists  of  a  Secretary  of  the  Navy  and 
assistant  secretaries,  an  admiral  and  rear  admirals,  captains,  com- 
manders, lieutenants,  ensigns  and  other  officers.  This  naval  depart- 
ment is  w^ell  organized,  and  fortunately  politics  rarely  enters  into  it. 
Besides  the  officers  mentioned,  there  is  a  general  board,  and  bureaus 
of  yards,  docks,  navigation,  ordnance,  construction  and  repairs, 
steam  engineering,  supplies  and  accounts,  medicine  and  surgery, 
naval  intelligence,  hydrographic,  naval  and  medical  examination, 
board  of  observation,  retiring  board,  medical  school  and  dispen- 
saries, general  inspectors  and  pay  corps;  and  each  of  these  depart- 
ments is  governed  by  a  head.  To  maintain  this  great  organiza- 
tion requires  an  annual  outlay  of  $130,000,000,  and  each  year  this 
amount  will  be  vastly  increased  with  the  addition  of  each  new  bat- 
tleship. Now  the  people's  extremity  is  the  nation's  opportunity, 
and  the  extreme  need  of  a  merchant  marine  to  carry  our  com- 
merce as  well  as  to  protect  our  battleships  is  surely  the  nation's 
opportunity,  so  what  more  natural  than  for  the  nation  to  come 
forward  in  this  extremity,  as  all  other  measures  that  have  been 
suggested  have  failed,  and  say:  "We  have  today  a  great  naval 
organization,  and  as  the  merchant  marine  is  to  be  an  auxiliary  to 
our  navy,  why  not  build  it  ourselves  and  control  and  operate  it?" 
This  nation  is  bound  to  protect  its  people  at  any  cost,  but  I  am  sure 
that  my  plan  is  altogether  feasible,  and  besides  may  not  cost  the 
nation  a  dollar. 

First,  let  me  tell  you  the  advantage  of  a  merchant  marine  con- 
trolled by  our  government,  and  then  I  will  tell  you  about  its  opera- 
tion. First  of  all,  I  will  take  up  the  protective  advantages.  A  mer- 
chant marine  owned  by  our  government  would  enable  it  to  build 
ships  on  designs  modeled  and  approved  by  our  navy  so  that  they 
could  be  promptly  converted  into  auxiliary  cruisers  in  time  of  war. 
These  ships  would  always  carry  a  number  of  American  boys  who 
would  be  trained  in  seamanship  and  would  be  manned  by  experi- 
enced sea-going  men.  These  crew^s.  visiting  the  different  ports  of 
the  world  would  become  familiar  with  the  coast  defenses  of  other 
nations.  The  government  controlling  these  ships  could  transfer  its 
officers  and  crews  from  its  merchant  ships  to  its  naval  ships  and 


48  NATIONAL     BUSINESS     CONGRESS 

lliu>  give  the  crews  of  both  op])ortunities  and  experiences  which 
they  would  not  have  if  the  merchant  marine  were  not  owned  and 
controlled  by  the  government.  To  illustrate  this,  today  the  gov- 
ernment has  great  difficulty  in  getting  seamen  for  tlie  navy.  Previ- 
ously I  have  stated  what  I  consider  the  main  reason  for  this.  Now 
under  the  proposed  plan  the  government  can  take  men  olT  battle- 
ships and  transfer  them  to  the  merchant  marine,  thus  giving  them 
an  opportunity  of  leading  a  more  active  and  exciting  life,  and  al- 
lowing them  to  get  home  oftener,  which  would  be  a  great  induce- 
ment. This  would  also  tend  to  break  down  the  class  prejudice  that 
now  seems  to  exist  in  our  navy,  and  I  am  sure  would  make  our 
navy  much  more  effective.  It  has  taken  many  years  and  much 
money  to  bring  our  navy  up  to  its  present  standard,  and  I  am  sure 
that  the  addition  of  a  merchant  marine  would  inspire  the  navy  wath 
new  life.  This  plan  would  result  in  building  up  a  great  force  of 
experienced  seamen  that  we  could  use  in  an  emergency  instead  of 
building  up  an  auxiliary  navy  for  a  foreign  nation.  The  $30,000,000 
which  we  expend  annually  for  harbor  improvements  would  be  spent 
for  our  own  benefit  instead  of  for  foreign  ship  owners,  and  instead 
of  paying  right  back  in  freight  rates  the  money  that  we  take  in 
for  our  exports  in  excess  of  our  imports  we  would  pay  this  money 
to  American  labor.  Instead  of  allowing  a  foreign  pool  to  make 
the  freight  rates  for  American  shippers,  if  we  controlled  our  mer- 
chant marine  we  would  see  that  no  discrimination  was  made  against 
the  American  shipper,  and  in  case  of  war  between  any  of  the  great 
shipping  nations  instead  of  having  our  commerce  paralyzed,  as  we 
would  have  it  under  present  conditions,  on  account  of  inability  to 
secure  ships  for  our  commerce,  we  would  go  right  on  attending  to 
our  business  and  shipping  the  exports  of  our  own  nation  on  our 
own  bottoms.  Instead  of  building  more  battleships  when  we  have 
not  enough  men  to  man  our  present  equipment  and  hardly  any  aux- 
iliaries for  our  present  navy,  we  would  build  a  merchant  marine 
which  would  augment  our  navy,  and  the  price  of  only  two  battle- 
ships would  give  us  a  merchant  marine  to  ply  between  our  country 
and  South  America,  at  least  on  the  east  coast,  and  this  would  be  a 
fair  start. 

Now,  then,  to  sum  up  the  subject:  My  plan  simply  means  that 
the  government  augment  its  present  naval  department  with  auxili- 
ary or  merchant  ships ;  that  it  use  such  portion  of  its  present  organi- 
zation and  seamen  that  is  considered  desirable,  simply  making  the 


NATIONAL     BUSINESS     CONGRESS  49 

merchant  marine  a  department  of  the  navy,  just  as  it  recently  made 
the  postal  savings  banks  a  department  of  the  postoffice ;  that  it  trans- 
fer officers  and  seamen  from  one  service  to  the  other  whenever  it 
appears  that  the  service  will  be  improved  by  such  changes.  As  the 
government  now  has  practically  all  the  overhead,  the  additional 
expense  of  operating  this  merchant  marine  would  be  c|uite  small 
comparatively,  and  we  could  make  such  freight  rates  and  furnish 
such  communication  that  would  encourage  our  manufacturers  to 
export,  and  could  make  such  rates  to  our  sister  republics  in  South 
America  that  would  encourage  them  to  trade  with  us  more  gen- 
erously, which  I  am  sure  they  would  gladly  do,  for  we  are  closer  to 
them  politically  and  geographically  than  any  other  nation,  and  we 
certainly  should  be  closer  to  them  commercially.  In  order  to  en- 
courage this  commerce,  even  if  the  government  operate  at  a  loss  in 
carrying  this  freight,  its  loss  would  not  involve  nearly  as  much 
money  as  the  amount  it  would  have  to  pay  out  in  ship  subsidies,  or 
for  the  transportation  of  the  mails,  which  is  only  another  name  for 
subsidy,  for  the  difference  between  the  American  scale  and  the  for- 
eign scale  that  it  would  pay  in  wages  it  would  save  in  overhead,  as 
against  foreign  competition. 

Now,  as  to  the  ability  of  the  government  to  operate  the  mer- 
chant marine :  it  would  be  one  of  the  simplest  duties  the  government 
would  perform.  It  has  had  much  experience  in  building  ships,  and 
certainly  it  could  design  and  build  the  ships  it  would  require.  It 
would  simply  add  to  its  present  crew  in  the  manning  of  the  ships 
and  establish  a  tariff  as  low  or  lower  than  the  ship  combine  now 
makes  to  its  foreign  shippers.  The  rest  is  only  a  matter  of  account- 
ing and  simple  honesty. 

Now  I  expect  opposition  to  this  plan  from  two  sources.  First, 
from  the  unpatriotic  Americans  who  are  interested  in  foreign  ships 
and  who  would  see  in  this  move  the  ultimate  upbuilding  of  a  great 
merchant  marine  entirely  owned  by  our  own  nation  and  success- 
fully competing  w^ith  the  ship  trust,  for  the  government  is  the  only 
institution  that  can  successfully  compete  with  it,  now  that  it  has 
been  allowed  to  reach  such  gigantic  proportions.  Second,  opposi- 
tion from  those  who  will  tell  you  that  this  will  put  the  govern- 
ment in  business,  that  this  is  paternalism,  or  socialism,  or  some  other 
"ism."  But  what  if  it  does  put  the  government  in  business?  Let 
me  read  vou  from  the  constitution : 


50  NATIONAL     BUSINESS     CONGRESS 

"We,  the  people  of  the  United  States,  in  order  to  form  a  more 
perfect  union,  estabHsh  justice,  insure  domestic  tranquillity,  provide 
for  the  common  defense,  promote  the  general  welfare,  and  secure 
the  blessings  of  liberty  to  ourselves  and  our  posterity,  do  ordain 
and  establish  this  constitution  for  the  United  States  of  America." 

Now  that  is  just  our  situation  today,  and  I  want  to  substitute 
for  the  word  "constitution"  the  words  "merchant  marine."  May  I 
read  it  again  ? 

"We,  the  people  of  the  United  States,  in  order  to  form  a  more 
perfect  union,  establish  justice,  insure  domestic  tranquillity,  pro- 
vide for  the  common  defense,  promote  the  general  welfare,  and  se- 
cure the  blessings  of  liberty  to  ourselves  and  our  posterity,  do 
ordain  and  establish  this  MERCHANT  :\IARINE  for  the  United 
States  of  America." 

Our  situation  today  appears  to  me  just  as  serious  as  it  did  to 
our  forefathers  when  they  wrote  the  constitution. 

If  this  plan  were  given  a  fair  trial,  I  am  sure  it  would  suc- 
ceed, and  we  would  quickly  add  more  ships,  as  the  demand  for  them 
would  be  so  great.  If  this  plan  were  given  a  fair  and  unprejudiced 
trial,  I  am  sure  it  would  never  be  abandoned,  but  would  be  a  great 
success.  Our  government  today  is  engaged  in  business  more  exten- 
sively than  any  corporation  in  the  world,  and  this  department  would 
surely  not  be  as  complicated  or  as  difficult  as  its  postoffice  or  its 
treasury,  or  in  fact,  any  of  its  other  departments. 

There  may  be  some  opposition  from  those  that  will  claim  that 
the  government  operates  with  less  economy  than  private  individuals 
can.  I  grant  that  as  a  general  proposition  this  is  true,  but  if  we 
cannot  get  a  private  individual  to  give  us  what  we  need,  just  as  we 
found  it  necessary  to  engage  in  the  postal  savings  bank  business,  in 
order  to  better  protect  the  savings  of  our  people,  so  we  must  engage 
in  the  merchant  marine  business.  As  far  as  economy  of  operation 
of  a  merchant  marine  is  concerned,  I  am  not  prepared  to  grant  that 
a  private  owner  can  operate  as  cheaply  as  the  government  can,  even 
allowing  liberally  for  so-called  governmental  extravagance,  for  much 
of  the  great  overhead  charges  which  I  have  before  mentioned  and 
which  this  government  must  maintain,  with  or  without  a  merchant 
marine,  would  have  to  be  furnished  by  a  private  owner,  and  he 
could  not  furnish  all  that  and  still  operate  as  economically  as  the 
government  could,  even  allowing  for  waste. 


NATIONAL     BUSINESS     CONGRESS  51 


Just  as  a  great  department  stt)re  adds  aiiDther  department  with- 
out materially  increasing  its  overhead  charges,  so  the  government 
could  add  this  department  in  the  same  manner.  The  talk  about  the 
government  going  into  business  arises  either  from  a  selfish  motive 
or  from  sheer  sentiment,  and  neither  ought  to  have  any  great 
weight  in  so  important  a  business  proposition  when  the  commer- 
cial life  and  safety  of  the  nation  is  at  stake.  The  people  select  their 
servants  just  as  the  employer  selects' his  employe,  and  the  people 
must  sooner  or  later  realize  that  commercial  honesty  and  integrity, 
both  in  governmental  and  priva'te  enterprises,  must  be  paramount, 
if  a  nation  shall  succeed,  and  as  the  nation's  responsibilities  increase 
it  will  demand  greater  integrity  of  its  employes. 

Yet  another  source  of  opposition  may  be  from  the  naval  offi- 
cers. Some  may  feel  that  it  is  beneath  the  dignity  of  a  naval  officer 
to  be  connected  with  trade.  Good !  If  that  is  the  sentiment,  let  us 
o-et  at  it  and  uproot  it.  The  naval  officer  is  made  of  no  different 
stuff  than  any  other  employe  of  the  nation,  and  if  the  exigency  of 
the  time  require  his  engaging  in  trade  to  assist  his  government,  and 
his  patriotism  be  not  equal  to  the  test,  we  would  better  get  rid  of 
that  class  and  democratize  our  navy.  This  process  of  houseclean- 
ing  would  unquestionably  make  a  great  improvement  in  our  navy, 
for  if  some  of  our  officers  find  themselves  too  busy  attending  pink 
teas,  to  take  oft'  their  gloves  and  dress  coat  and  do  some  work  for 
the  government  which  supports  them,  I  think  it  time  to  take  off 
their  epaulettes  and  let  them  try  the  pink  tea  route  exclusively  and 
see  what  it  will  yield  them  in  the  way  of  sustenance.  But  I  can 
hardly  believe  that  there  will  be  any  considerable  opposition  from 
that  source. 

I  wish  to  quote  now  from  a  letter  from  the  admiral  of  the  navy, 
George  Dewey.  He  says:  "I  think  your  plan  is  feasible;  and  if 
you  can  induce  Congress  to  think  so,  this  movement,  which  has  re- 
ceived numerous  discussions  by  Congress  and  individuals  for  some 
time,  will  perhaps  ultimately  be  put  into  effect." 

I  think  that  this  sentiment  echoes  the  thought  of  our  naval  offi- 
cers, and  would  be  re-echoed  down  to  the  seamen. 

Before  I  close,  I  would  say  this — another  question  may  arise  in 
your  mind— you  may  ask:  "If  you  are  opposed  to  a  subsidy  be- 
cause the  trust  would  cut  prices  and  then  the  subsidized  lines  would 
either  go  out  of  business,  or  join  the  trust,  or  come  back  for  more 
subsidy,  why  would  not  the  effect  be  the  same,  if  the  nation  com- 


52  NATIONAL     BUSINESS     CONGRESS 

peted  with  the  trust?*'  My  answer  is,  the  nation  is  backed  up  by 
a  hundred  milhon  people.  It  will  spend  millions  for  defense.  Let 
the  trust  beware!    Gentlemen,  I  thank  you.     (Applause.) 

The  Cii.mrman  :    Is  there  any  discussion  of  the  subject? 

AIr.  E.  Clarence  Jones  (of  New  York)  :  On  my  own  initia- 
tive, I  think  it  would  be  timely,  on  this,  the  first  day  of  this  Con- 
gress, to  say  for  myself,  that  it  seems  to  me  that  it  has  been  fully 
shown  that  there  is  nothing  that  can  better  promote  the  business 
interests  of  the  country  than  this  sort  of  a  forum.  I  think  the 
organization,  in  establishing  this,  has  done  a  great  work.  The  only 
question  is,  can  it  continue  it?  It  seems  to  me  that  if  we  think 
over  the  next  two  days  what  I  am  to  suggest,  a  plan  may  be  evolved 
whereby  these  discussions  of  this  forum  may  be  continued.  There 
are  at  least  five  hundred  active  commercial  organizations  in  the 
country.  If  all  of  those  five  hundred  were  invited  to  join,  to  co- 
operate in  this  work,  to  hold  an  annual  congress,  to  participate  in 
its  discussions,  and  were  asked  to  contribute  a  small  sum  for  that 
purpose.  I  think  they  would  all  do  it.  Personally,  I  am  very  anxious 
to  see  these  discussions  continued.  I  have  been  so  interested  today, 
and  I  only  speak  now  for  the  reason  that  it  seems  to  me  that  it  will 
give  us  two  days  to  think  it  over  and  decide  whether  anything  can 
be  done  along  these  lines. 

I  would  like  to  say  that  the  organization  that  I  represent  would 
be  glad  to  subscribe  annually,  and  I  am  sure  there  are  other  mem- 
bers here  from  other  organizations  who  will  feel  and  speak  for 
their  own  organizations  the  same  way. 

The  Chairman  :     I  thank  you,  Mr.  Jones. 

Mr.  Frank  D.  Pavey  (of  New  York)  :  Mr.  Chairman  and 
Gentlemen — I  was  very  much  interested  in  one  part  of  Mr.  Rosen- 
thal's paper,  because  he  compared  the  better  shipping  facilities  be- 
tween Europe  and  the  east  coast  of  South  America.  It  happened 
that  last  year,  in  connection  with  business,  it  called  for  a  great  deal 
of  economic  investigation.  I  happened  to  go  to  the  Argentine  Re- 
public. Like  every  American  going  from  home,  and  remaining 
for  months,  when  business  has  been  finished,  I  was  in  a  hurry  to 
get  home.  When  I  looked  for  the  quickest  way  to  get  from  Buenos 
Ay  res,  I  found  that  if  I  would  take  the  fast  Italian  boat  into  the 
Mediterranean,  and  then  to  Barcelona  and  into  Spain,  and  then  a 


NATIONAL     BUSINESS     CONGRESS  53 


fast  steamer  from  Freiburg,  I  could  get  home  from  three  to  four 
clays  earlier  than  over  any  other  route. 

But  I  think  that  is  not  a  question  of  subsidy.  I  think  it  is  a 
question  of  trade,  and,  in  order  to  state  my  conclusions  before  I 
give  the  reasons  for  them  I  will  say  that  if  Mr.  Rosenthal,  as  a 
promoter,  would  like  to  establish  an  American  steamship  line  to  ply 
between  New  York,  or  any  port  in  the  eastern  coast  of  the  United 
States  and  the  Argentine,  the  most  practicable  method  by  which  he 
could  do  that  would  be  to  get  the  Beef  Trust  and  the  Harvester 
Trust  to  unite  in  the  construction  of  that  line  of  steamboats.  Of 
course,  that  suggestion  is  not  immediately  practicable,  because  of 
the  uncertainty  as  to  how  many  of  the  Beef  Trust  will  be  left  out 
of  jail,  but  my  reason  for  making  the  suggestion  is  this:  It  is 
only  a  question  of  time,  and  not  a  very  long  time,  until  America  will 
cease  to  supply  England  with  meat  products.  The  falling  off  has 
been  so  great  as  to  be  noticeable,  not  only  to  the  men  who  are  par- 
ticularly interested,  but  to  other  men  as  well,  and  the  reason  for 
that  lies  at  home.  With  the  settlement  of  this  great  interior  coun- 
try, and  the  building  up  of  cities  and  villages  of  greater  and  greater 
size  on  the  plains,  the  plains  are  gradually  being  cut  up,  and,  with 
the  cutting  up  of  the  plains,  the  great  herds  of  cattle  and  hogs  from 
which  the  Beef  Trust  drew  its  supplies  to  ship  to  England  are  be- 
ing cut  up  or  driven  farther  to  the  borders  and  into  iMexico. 

With  the  Beef  Trust,  all  of  the  different  groups  that  constituted 
the  Beef  Trust  have,  of  course,  for  many  years,  had  an  elaborate 
selling  organization  in  England,  which  is  practically  the  only  coun- 
try in  Europe  in  which  they  can  sell  beef.  Their  lack  of  supplies  in 
this  country,  due  to  the  high  prices  and  small  production,  has  led 
them  to  go  to  the  Argentine  in  order  to  get  the  supplies  to  furnish 
to  the  English.  Prior  to  their  advent  in  Argentina  there  were  Eng- 
lish Companies  there,  but  the  people  usually  designated  as  the  Beef 
Trust  had  to  disband  their  organization  in  England  or  go  to  the 
Argentine  for  their  supplies.  Swift  purchased  one  plant  there. 
The  National  Packing  Company  purchased  another.  Armour  and 
Schwarzschild  &  Sulzberger  have  all  purchased  land  there  with  a 
view  of  establishing  plants  there.  They  have  the  reputation  there 
of  being  more  successful  in  the  meat  packing  business  than  either 
the  English  or  the  natives.  In  fact,  the  natives  are  a  distinct  fail- 
ure, and  it  is  practically  left  to  the  English  and  American  packers. 
The  Americans,  are  credited  with  knowing  better  how  to  utilize  all 


54  NATIONAL     BUSINESS     CONGRESS 

tlic  bv-products  of  the  business  and  to  make  money  where  native 
plants  have  failed.  Of  course,  that  may  be  due  to  the  fact  that 
they  had  very  much  better  selling  organizations  already  established 
in  England.  Init  tlicir  success  is  not  doubted.  The  principal  difii- 
culty  about  an  American  steamship  line  between  New  York,  say, 
and  Buenos  Ayres,  is  the  question  of  a  return  cargo,  and  the  Eng- 
lish shipping  men  maintain  that  it  is  perfectly  absurd  to  talk  about 
an  American  subsidy  that  will  be  sufficient  practically  to  take  the 
place  of  a  return  cargo. 

W'liile.  of  course,  there  are  products  of  the  Argentine  and 
Uruguay  which  come  to  this  country,  of  which  hides  is  a  great  one, 
thev  do  not  constitute  the  great  export  products  of  those  coun- 
tries, the  great  exports,  beef,  grain,  etc.,  being  the  principal  ones.  It 
is  mv  judgment  that  the  time  will  come  when  the  Atlantic  seaboard 
will  receive  both  grain  and  beef  from  the  Argentine,  but  that  is 
somewhat  remote.  A  ship  that  goes  from  here  to  the  Argentine 
has  no  certainty  of  a  cargo  on  the  return  trip.  In  going  from  Eng- 
land they  have  a  certainty  that  if  they  will  equip  themselves  with 
the  proper  refrigeration  for  beef  and  mutton  they  will  always 
go  back  loaded.  I  am  told  that  that  is  practically  why  there  is  no 
steamship  line  between  Buenos  Ayres  and  the  Atlantic  seaboard. 

I  was  told  that  American  agricultural  implements  are  better 
liked  than  any  other  make,  where  they  have  an  opportunity  to  get 
in  on  anything  like  the  same  price.  In  fact,  I  have  been  told  in 
England  that  small  agricultural  implements  made  in  America  are 
considered  far  superior  to  their  own  make,  because  of  the  superior 
finish  and  superior  workmanship,  but  it  is  certainly  true  in  South 
America.  The  importers  of  machinery  in  South  America  say  that 
the  higher  freight  rates  particularly  make  it  impossible  for  them  to 
import  American  agricultural  machinery  and  sell  it  to  the  entire 
exclusion  of  machinery  from  other  countries.  But  the  agricultural 
machinery  and  the  agricultural  implements  are  greatly  liked.  I  am 
not  a  practical  shipping  man,  but  it  seems  to  me  that  if  the  Beef 
Trust  and  the  Harvester  Trust  could  establish  a  steamship  line  and 
carry  agricultural  implements  from  the  Atlantic  sea  coast  to  Buenos 
Ayres,  and  then  meat  products  from  Buenos  xA.yres  back  to  England, 
and  then,  on  the  return  to  the  United  States  they  would  be  loaded, 
and  make  a  triangular  trip,  they  could  in  that  way  maintain  the 
service,  and  it  is  my  opinion  that  unless  you  can  work  that  out,  an 
American  service  between  those  two  points  will  not  be  practical  until 


NATIONAL     BUSINESS     CONGRESS  55 

we  arrive  at  the  i)oint  where  the  Atlantic  seaboard  imports  grain 
and  meat  from  the  Argentine.     (Applause.) 

The  Chairman:  In  respect  to  the  gentleman's  remarks  as  to 
the  return  cargo,  ships  do  cross  the  Atlantic  coming  to  this  country 
for  cargo.  I  have  now  two  ships  crossing  the  Atlantic  consigned 
to  me.  to  take  a  cargo  out  of  this  country;  a  cargo  that  I  could  not 
get  the  carrying  capacity  for,  and  those  ships  will  be  loaded  within 
the  next  sixty  days.  If  we  are  to  get  our  products  into  foreign 
markets  successfully,  economically  and  expeditiously,  we  have  some- 
thing to  do  besides  the  inauguration  of  a  merchant  marine.  In 
other  words,  we  must  have  a  better  Consular  service  than  w^e  have 
at  the  present  time.  Our  Consular  service  has  been  materially  im- 
proved during  the  last  three  or  four  years,  but  there  is  certainly 
room  for  greater  improvement. 

\\'e  have  with  us  today  a  gentleman  who  has  been  a  consul, 
who  has  gone  through  the  examination  for  consularship  with  great 
credit,  and  he  will  tell  us  wdiat  he  knows  about  it. 

Gentlemen  of  the  Congress :  It  is  my  pleasure  to  present  Dr. 
Samuel  MacClintock.  formerly  of  the  University  of  Chicago  and 
recentlv  of  the  American  Consular  Service. 


THE    AMERICAN    CONSULAR    SERVICE. 


Bv  Samuel  MacClintock. 


Mr.  Chairman  and  Gentlemen: 

Shall  we  continue  to  maintain  our  consular  service? 

It  might  seem  a  waste  of  time  to  ask  such  a  question  were  it 
not  for  the  fact  that  every  now  and  then  some  one  not  acquainted 
wnth  the  wide  range  of  consular  activity  raises  the  question  as  to 
whether  it  would  not  be  just  as  well  to  abolish  the  service  alto- 
gether. This  last  winter  when  the  bill  to  provide  suitable  perma- 
nent buildings  for  our  diplomatic  and  consular  officers  abroad  was 
up  in  the  House  of  Representatives,  Judge  Underwood,  of  Georgia, 
opposed  the  measure  on  the  ground  that  the  foreign  service  should 
be  abolished  entirely.  The  argument,  such  as  it  is,  for  this  view  is 
that  in  this  day  of  rapid  communication  to  all  parts  of  the  earth, 
negotiations  can  be  carried  on  between  interested  parties  directly, 


56  NATIONAL     BUSINESS     CONGRESS 

whether  they  be  governments  or  individuals,  and  without  the  media- 
tion of  agents,  except  when  special  situations  arise. 

Happily  this  view  does  not  obtain  generally.  The  consensus 
of  opinion  among  manufacturers,  exporters,  travelers  and  especially 
among  our  citizens  residing  abroad,  is  that  the  consular  service  is  a 
very  valuable  aid  to  commerce  and  that  it  should  at  once  be  placed 
by  law  upon  a  jicrmancnt  merit  basis  and  improved  and  extended 
so  that  its  value  would  be  still  further  enhanced.  The  judgment  of 
the  country  is  overwhelmingly  in  favor  of  placing  the  service  upon 
such  a  basis  as  will  remove  it  entirely  from  the  pernicious  effects  of 
the  spoils  system,  and  it  is  only  a  question  of  time  until  Congress 
will  recognize  the  insistence  of  this  righteous  demand,  and  write 
into  our  statutes  some  such  law  as  this  League  has  for  years  been 
advocating. 

Before  taking  up  the  bills  relating  to  the  subject,  which  are  to 
be  introduced  into  Congress  at  this  present  session,  let  us  see,  brief- 
ly, what  are  some  of  the  distinctive  services  rendered  by  our  con- 
sular officials. 

Commercial  Duties. — It  is  generally  recognized  that  in  order  to 
•secure  foreign  markets,  it  is  necessary  to -have  both  broad  and  accu- 
rate knowledge  of  the  peculiar  trade  conditions  existing  in  differ- 
ent countries,  the  local  customs  and  tastes,  the  character  of  the 
goods  demanded,  the  banking  and  transportation  facilities  and  the 
prevailing  systems  of  credit.  One  of  the  accepted  means  used  by 
all  modern  governments  for  promoting  such  commercial  relations 
is  that  of  the  consular  service. 

This  service,  in  its  inception,  goes  well  back  into  the  [Middle 
Ages.  At  first  it  was  not  intended  so  much  to  render  aid  to  trade 
and  commerce  as  it  was  to  protect  the  private  rights  of  citizens  liv- 
ing or  traveling  abroad.  In  modern  times  consuls  have  almost  com- 
pletely lost  their  representative  character,  which  has  been  assumed 
by  the  diplomatic  branch  of  the  foreign  service,  and  likewise,  in  all 
except  a  few  non-Christian  countries,  their  judicial  functions.  The 
consular  service  has  thus  become  distinctly  commercial  in  its  char- 
acter. Its  great  justification  at  the  present  time  is  the  aid  it  can 
render  in  securing  and  promoting  foreign  trade.  This  service  in- 
cludes the  bringing  about  of  mutual  good  will  and  understanding. 
Consuls  may,  therefore,  at  the  present  time,  be  regarded  as  soldiers 
of  commerce,  or  as  ministers  of  commerce,  according  as  they  are 


NATIONAL     BUSINESS     CONGRESS  57 


looked  upon  as  waging  commercial  warfare  or  as  promoting  good 
will  and  understanding. 

In  discussing  the  service  which  consuls  render  to  the  trade  and 
commerce  of  their  country,  it  may  he  stated  at  the  outset  that  they 
cannot  create  trade,  nor  can  they  successfully  tell  an  individual  how 
he  should  estahlish  and  carry  on  his  husiness.  They  can,  however, 
make  hroad,  sound  observations  on  the  products  and  commercial 
possibilities  of  a  particular  country,  its  financial  and  industrial  con- 
ditions and  the  tendencies  of  its  trade,  the  local  usages  and  re(iuire- 
ments,  commercial  statistics,  and  the  steps  necessary  to  be  taken  if 
one  wants  to  enter  upon  a  particular  field;  also,  the  scientific  dis- 
coveries and  progress  in  the  arts,  the  encouragement  given  to  tech- 
nical and  commercial  education,  the  methods  of  advertising,  and 
other  helps  and  suggestions.  Such  information  is  of  the  utmost 
importance  to  the  exporter  who  wants  to  get  into  the  foreign  mar- 
ket and  cannot  afford  to  make  an  exhaustive  investigation  on  his 
own  account.  Again,  consuls  can  do  much  to  promote  good  will, 
break  down  local  prejudices  and  smooth  over  difficulties  with  gov- 
ernment officials  and  local  dealers.  Such  services  as  these,  and  not 
the  rendering  of  direct  personal  assistance  to  those  engaged  in  for- 
eign trade,  is  the  true  field  for  consular  endeavors.  In  addition  to 
the  general  lines  of  information  mentioned,  consuls  acquire  much 
valuable  knowledge  relating  to  individual  business  propositions,  such 
as  a  knowledge  of  particular  markets,  business  connections,  details 
of  delivery  and  payment,  salesmanship  and  the  protection  of  trade- 
marks and  copyrights. 

Our  consuls  are  called  upon  by  the  government  to  make  a 
great  variety  of  reports,  dealing  with  the  subjects  just  mentioned 
and  many  others.  These  are  issued  as  annual,  quarterly,  monthly, 
daily  and  special  reports,  and  may  be  had  of  the  government  upon 
request.  They  are  of  value  as  showing  the  general  conditions  prev- 
alent in  the* consular  district  and  the  possibilities  of  new  or  further 
extensions  of  trade. 

The  reports  upon  tariff  and  customs  regulations  are  of  especial 
assistance  to  those  engaged  in  either  importing  or  exporting.  By 
prompt  notice  of  important  changes  and  pending  legislation  of  this 
character,  much  time  and  money  have  often  been  saved.  This  has 
been  particularly  true  with  regard  to  Latin  America,  where  the  cus- 
toms- regulations  are  subject  to  freciuent  changes  and  where  rigid 
compliance  with  the  exactions  is  often  necessary  to  avoid  heavy 


58  NATIONAL     BUSINESS     CONGRESS 

delay  and  loss.  The  rei)orts  of  this  charaeter  also  show  how  the 
local  requirements  may  l)e  met  in  sueli  a  way  as  to  save  friction 
with  the  government  authorities.  They  also  point  out  practical 
expedients  hv  which  shippers  may  save  money.  Thus  they  have 
shown  that  products  with  metal  parts  sent  to  Russia  or  Germany 
should  have  the  dififerent  metals  packed  separately,  so  as  to  avoid 
paying  upon  all  in  accordance  with  the  highest  class  article  in  the 
package. 

The  consular  service  renders  valuable  aid  in  protecting  our 
customs  revenue.  The  certificate  of  the  consul  at  the  port  of  ship- 
ment verities  the  correctness  of  all  invoices  of  goods  destined  for 
the  United  States.  This  duty  presupposes  an  extensive  knowledge 
of  general  values  and  of  the  state  of  trade  in  the  consul's  district, 
such  as  can  be  acquired  only  by  close  study  as  well  as  by  a  wide 
familiarity  with  local  conditions. 

The  use  of  ad  valorem  duties  in  our  tariff  system  renders  the 
temptation  to  the  undervaluation  of  the  imported  goods  very  strong, 
and  this  may  result  in  severe  loss  to  the  government.  This  is  espe- 
cially true  of  highly  manufactured  goods,  such  as  form  a  consider- 
able part  of  our  imports.  The  value  of  such  goods  is  difficult  for 
any  one  but  an  expert  in  each  line  of  trade  to  know.  The  system  of 
undervaluations,  long  practiced,  especially  by  the  European  export- 
ers, worked  to  the  decided  injury  of  their  American  competitors, 
who  were  finally  almost  driven  from  the  field.  By  shrewd  and  per- 
sistent efforts  of  our  consular  officers,  especially  in  Switzerland  and 
Germany,  such  unfair  methods,  in  at  least  a  few  lines,  were  finally 
exposed.  It  has  been  estimated  that  the  savings  resulting  to  the 
government  alone  amounted  to  over  a  million  dollars  a  year,  while 
checking  the  tendency  to  dishonest  invoicing  has  of  itself  done  much 
to  establish  fair  conditions  in  trade.  The  almost  complete  failure 
recently  of  our  consuls  to  ascertain  with  any  measure  of  exactness 
the  cost  of  producing  foreign  goods  shows  how  difficult  is  the 
undertaking,  and  the  lack  of  funds  with  w^hich  to  make  public  such 
parts  of  the  reports  as  were  of  practical  value  shows  the  handicaps 
the  service  is  under. 

A  special  class  of  reports  deals  with  the  preparation  and  inspec- 
tion of  food  products  for  foreign  markets.  European  countries  have 
sometimes  passed  stringent  measures  against  our  meats  and  fruits 
particularly,  on  the  ground  of  protecting  the  public  health,  though 
in  reality  often  prompted  by  the  fear  of  competition.    Consuls  have 


NATIONAL     BUSINESS     CONGRESS  59 


been  able  at  times  to  sbow  tbe  unreasonableness  of  such  actions,  and 
especially  to  show  that  no  injurious  results  could  possibly  follow 
the  violation  of  such  formal  regulations  as  that  of  the  French  gov- 
ernment requiring  canned  goods  to  be  sealed  with  solder  of  pure 
tin  only. 

Another  class  of  reports  deals  with  the  demands  of  the  local 
markets.  The  people  of  all  countries  have  their  national  customs 
and  preferences,  and  any  one  who  wishes  to  supply  their  demands 
must  be  willing  to  adjust  his  products  to  such  requirements.  This 
applies  not  onlv  to  the  goods  themselves,  but  to  the  means  used  in 
making  sales  and  payments.  Our  manufacturers  have  not  infre- 
quentlv  shown  great  inditTerence  or  even  positive  unwillingness  to 
vary  their  patterns  or  standards  in  order  to  meet  the  needs  or 
prejudices  of  the  foreign  consumer,  while  our  European  competi- 
tors have  shown  commendable  willingness  to  do  so.  Knowledge 
of  the  peculiar  requirements  of  different  countries,  and  a  wilhng- 
ness  to  meet  them,  are  necessary,  however,  if  an  extensive  foreign 
trade  is  to  be  built  up.  A  trade  built  upon  such  a  reputation  is  hard 
to  shake,  especially  in  conservative  countries. 

The  reports  also  indicate  how  the  trademarks  may  advantage- 
ously be  made  to  conform  to  the  native  tastes.  Thus,  "in  India  a 
rampant  leopard  is  popular;  in  China,  dragon  figures;  in  Uruguay, 
marks  of  a  religious  character,  like  the  Star  of  Bethlehem ;  and  in 
Sierra  Leone,  certain  vines,  trees  and  animals  formerly  worshiped 
by  the  natives  and  still  held  in  great  respect."  The  English  have 
made  great  success  with  the  cotton  trade  in  Japan  because  they 
have  made  designs  based  upon  specimens  of  old  Japanese  art. 
These  illustrations  will  suffice  to  show^  how  consuls  can  aid  the 
foreign  trade  by  pointing  out  to  manufacturers  the  local  peculiari- 
ties  and    requirements. 

Reports  of  another  class  have  a  considerable  though  tempo- 
rary value.  Thus,  a  widespread  crop  failure,  destructive  flood  or 
other  public  calamity  may  open  up  a  profitable  field  for  exports, 
and  notice  of  great  public  or  private  works  soon  to  be  undertaken, 
such  as  the  buying  of  government  supplies,  often  results  in  the  con- 
tracts being  secured  by  our  own  firms.  Consuls  have  reported 
upon  harbor  improvements,  extension  of  railroad  and  steamship 
lines,  opening  up  of  new  districts  to  trade,  and  by  their  efiforts  have 
somefimes  secured  the  establishment  of  better  banking  facilities  and 
direct  steamship  communication. 


60  NATIONAL     BUSINESS     CONGRESS 

Our  consuls  have  made  many  valuable  suggestions  as  to 
methods  of  doing  business  in  the  various  countries.  One  of  the 
most  important  of  such  suggestions  is  that  connected  with  credit. 
With  us  cash  payments  or  short-time  obligations  are  customary,  but 
in  Europe,  South  America  and  the  Orient,  long  credits  are  usually 
given.  The  European  traders  have  shown  much  greater  willing- 
ness to  recognize  the  conditions,  whatever  they  might  be,  and  to 
accommodate  themselves  to  the  local  customs  than  have  we  Ameri- 
cans. This,  together  with  the  long  credits  made  possible  by  the 
backing  of  the  large  German  banking  houses,  is  given  as  one  reason 
why  the  Germans  have  been  notably  successful  in  South  America. 
Consuls  also  report  upon  the  procedure  involved  in  the  collection 
of  debts;  they  furnish  trade  directories,  and  they  may  even  advise 
as  to  the  commercial  rating  and  general  standing  of  local  business 
firms,  and  individuals. 

Many  complaints  and  suggestions  have  been  forwarded  by 
consuls  as  to  the  manner  in  which  our  goods  destined  to  foreign 
markets  are  packed  and  shipped.  Thus,  a  gentleman  in  Chile  re- 
cently ordered  a  large  and  expensive  piece  of  machinery.  When  it 
arrived,  a  small  but  essential  part  was  lacking.  It  took  months  to 
secure  the  part,  and  this  meant  a  vexatious  delay  and  loss. 

It  is  pointed  out  over  and  over  again  in  the  reports  that  the 
markings  and  invoices  should  always  be  in  the  local  language  and 
in  conformity  with  government  requirements;  that  prices  and 
measurements  should  also  be  in  the  local  language  and  for  goods 
delivered  at  the  seaboard,  in  sizes  suited  to  the  local  means  of  trans- 
portation. Thus  it  is  manifestly  absurd  to  send  heavy  boilers  all 
set  up  to  an  interior  point  in  Honduras,  when  the  only  means  of 
transportation  to  the  destination  is  on  the  back  of  mules. 

Consuls  give  valuable  advice  as  to  the  best  methods  by  which 
trade  may  be  secured  in  their  respective  districts.  They  are  for- 
ever pointing  out  the  uselessness  of  sending  catalogues  and  circulars 
to  people  who  do  not  understand  one  word  of  the  language  in 
which  these  are  printed.  They  insist  that  printed  matter,  however 
carefully  gotten  up,  can  never  take  the  place  of  branch  houses  and 
agents  who  know  the  language  and  customs  of  the  country.  They 
advocate  the  establishment  of  exhibits  of  simple  manufactures,  and 
some  of  these  exhibits  have  been  notably  successful. 

Consuls  have  rendered  valuable  assistance  to  our  manufactur- 
ers in  protecting  their  patented  articles  from  imitation  and  subse- 


NATIONAL     BUSINESS     CONGRESS  61 

quent  sale.  They  have  shown  how  patents,  copyrights  and  trade- 
marks might  be  obtained,  registered  and  protected.  Not  infre- 
quently our  goods  and  trademarks  have  been  so  successfully  imi- 
tated in  foreign  countries  as  to  kill  olT  a  promising  trade  by  the 
substitution  of  an  inferior  article.  American  sewing  machines 
were  practically  driven  out  of  the  markets  of  Brazil  in  this  way  by 
German  imitations. 

In  the  "Foreign  Trade  Opportunities,"  contained  in  the  Daily 
Consular  Reports,  notice  is  given  of  both  information  and  inqui- 
ries on  hand  accessible  to  applicants  before  such  reports  are  pub- 
lished for  the  general  public.  This  was  found  necessary  in  order 
to  secure  this  information  for  our  own  citizens  first. 

One  of  the  things  which  struck  me  as  odd  while  I  was  in  the 
service,  and  one  which  I  am  unable  to  explain  satisfactorily,  is  the 
fact  that  salesmen,  prospectors  and  investigators  in  foreign  coun- 
tries do  not  make  more  use  than  they  do  of  local  consular  aid.  I 
know  that  it  not  infrequently  happens  that  such  agents  go  into  a 
region  with  whose  local  history  and  conditions  they  are  not 
familiar,  and  yet  do  not  call  upon  the  consul  or  make  any  other  use 
of  the  information  which  the  latter  is  able  and  willing  to  furnish. 

It  is  not  contemplated  that  the  consular  service  should  ever 
take  the  place  of  private  enterprise.  Consuls  cannot  be  expected  to 
be  experts  in  all  lines  of  industry  and  commerce,  nor  can  they  be 
expected  to  render  active  personal  service  to  exporting  firms. 
They  can,  of  themselves,  neither  create  nor  maintain  trade;  the 
most  they  can  do  is  to  facilitate  it.  The  producer  or  exporter  him- 
self must  go  after  the  foreign  trade  if  he  wants  it,  and  all  that  he 
can  reasonably  ask  of  the  government  is  that  it  give  him  general 
assistance.  Furthermore,  no  great  foreign  trade  can  be  built  up  as 
long  as  we  are  contented  with  the  home  market  in  full  years  and 
look  to  the  foreign  market  only  in  off  years.  The  foreign  trade 
must  be  an  object  in  itself  and  not  simply  an  outlet  for  the  surplus 
of  slack  years. 

Consular  services  are,  therefore,  rendered  to  a  general  class 
and  not  primarily  to  individuals.  This  is  especially  true  as  to  the 
opening  up  of  new  sources  of  trade,  and  reporting  upon  general 
conditions.  After  a  business  is  once  estabUshed,  consuls  can  then 
render  but  little  direct  assistance,  for  necessarily  those  intimately 
acquainted  with  its  details  are  in  a  better  position  to  judge  of  its 
re(iuirements  than  the  consular  officers  can  be.     Nevertheless  the 


62  NATIONAL     BUSINESS     CONGRESS 


general  information  furnislied  continues  to  be  of  considerable  value 
even  to  those  already  in  the  field,  for  such  matters  as  opportune 
conditions  for  the  expansion  of  trade,  health  regulations,  protec- 
tion of  patents  and  trademarks,  opening  of  new  routes  and  lines  of 
communication,  shortage  of  crops,  the  projection  of  new  works 
and  changes  in  the  law,  do  not  ordinarily  come  within  the  observa- 
tion of  those  engrossed  in  any  single  line  of  business. 

So  far  from  it  being  true  that  the  consular  service  should  be 
abolished  because  "you  can  do  business  just  as  well  by  writing  a 
letter  as  by  sending  a  man,"  the  whole  demand  is  for  better  men 
who  can  report  accurately  the  conditions  in  the  foreign  field  and 
thus  help  to  establish  better  commercial  relations.  There  is  no 
doubt  that  if  the  government  fails  to  provide  a  strong  and  efficient 
consular  service  to  serve  the  general  interests  of  all  its  citizens, 
large  private  corporations  and  chambers  of  commerce  will  do  so  for 
their  own  benefit.  This  is  what  the  Chicago  Association  of  Com- 
merce did  recently  when  it  opened  an  office  in  Buenos  Aires  for  the 
purpose  of  promoting  trade  with  that  rapidly  growing  part  of  the 
world. 

Our  State  Department  has  been  criticised  for  its  recent  vigor- 
ous efforts  to  promote  our  foreign  trade  and  to  secure  our  share  in 
the  commercial  openings  in  various  parts  of  the  world.  The  utili- 
zation of  our  full  diplomatic  and  consular  services  for  these  pur- 
poses has  been  ironically  dubbed  "dollar  diplomacy,"  just  as  if  the 
securing  of  such  results  were  not  the  justification  of  our  foreign 
service.  In  general,  our  government  has  done  too  little  rather  than 
too  much  to  help  our  manufacturers  and  exporters  to  secure  for- 
eign markets ;  and  the  aggressive  and  successful  efforts  of  the  pres- 
ent administration  in  this  field  should  receive  the  hearty  apprecia- 
tion of  all  interested  in  the  extension  of  American  capital  and  trade 
abroad. 

Legal  and  Adminisiratk'c  Duties:  There  is  a  disposition  on 
the  part  of  those  who  think  of  the  consular  service  as  only  an 
agency  for  buying  and  selling  goods,  to  fail  to  take  into  considera- 
tion certain  other  very  important  duties  imposed  upon  our  consular 
officers.  Thus,  they  must  give  attention  to  our  shipping,  wherever 
such  exists.  The  care  and  inspection  of  ships,  their  condition  and 
sale  abroad,  the  custody  of  ships'  papers,  together  with  the  general 
supervision  of  seamen,  including  their  enlistment  abroad,  their  dis- 
putes, discharges,  wages,  desertions  and  relief,  all  fall  under  the 


NATIONAL     BUSINESS     CONGRESS  63 

consular  supervision.     Again,  there  are  important  duties  connected 
with  immigration  and  quarantine  laws,  rules  and  regulations. 

Among  the  most  important  consular  duties  towards  our 
nationals  living  or  traveling  abroad  is  seeing  that  they  get  the  privi- 
leges and  immunities  to  which  they  are  entitled  under  the  law  of  the 
country  in  which  they  reside;  administering  upon  their  estates  if 
they  should  die  intestate ;  and  viseing  travelers'  passports.  These 
duties  are  light  in  the  old  settled  countries  of  Western  Europe,  but 
they  are  the  most  important  which  a  consul  can  render  to  his  own 
nationals  in  any  country  undergoing  serious  internal  disturbances. 
There  is  no  better  way  known  of  developing  foreign  trade  than 
through  the  permanent  location  in  a  foreign  country  of  our  own 
citizens.  The  president  of  the  Comite  des  Conseillers,  of  Paris, 
said  recently  that  a  country  wishing  to  export  its  products  must 
begin  by  exporting  men — "le  commerce  suit  ses  nationaux."  Ameri- 
cans, as  a  rule,  have  so  many  opportunities  at  home  that  compara- 
tively few  of  our  young  men  care  to  seek  their  fortunes  in  foreign 
lands.  One  result  of  this  was  recently  expressed  by  the  president 
of  the  American  Chamber  of  Commerce  in  Paris  in  the  following 
words:  "A  source  of  national  weakness  has  always  been  that 
American  interests  abroad  are,  to  a  large  extent,  in  alien  hands, 
through  the  lack  of  men  conversant  with  foreign  languages  and 
foreign  methods  of  business."  Now%  it  is  obviously  the  duty  of  a 
country  wdiich  encourages  its  citizens  to  live  in  foreign  lands  in 
order  to  develop  commercial  relations,  to  follow  these  citizens  with 
its  protecting  arm  and  secure  for  them  adequate  preservation  of- 
their  lives  and  property.  Not  to  do  so,  is  to  fail  to  give  its  citi- 
zens the  care  and  protection  which  is  the  duty  of  sovereignty  cor- 
responding to  the  correlative  duty  of  obedience  on  the  part  of  the 
citizen.  Our  citizens  in  ^Mexico,  in  China,  in  Tripoli,  in  Persia,  and 
often  in  Central  and  South  America,  while  living  abroad  in  the  pur- 
suance of  legitimate  endeavors,  look  to  their  government  with  keen 
solicitude  for  protection. 

While  I  was  stationed  in  Honduras,  the  most  disturbed  and 
distressed  part  of  revolutionary  Central  America,  there  were  ap- 
proximately five  hundred  American  citizens  in  my  consular  district 
at  Puerto  Cortes.  Some  of  these  were  substantial  planters ;  others, 
day  laborers ;  while  still  others  were  sojourning  in  that  tropical 
clime  because  it  Avas  more  congenial  to  them  and  to  their  past  deeds 
than  their  own  country.     Now,  these  American  citizens  were  often 


64  NATIONAL     BUSINESS     CONGRESS 


sorely  distressed  by  the  unsettled  conditions  around  them.  Appeal 
to  the  courts  was  generally  ineffective.  They  had  to  depend  either 
upon  their  own  good  right  arms  or  else  upon  the  efforts  of  their 
government  to  secure  them  their  rights.  In  such  a  country  as  this 
the  legal  and  administrative  duties  of  a  consul  are  more  important 
by  far  than  the  commercial  duties. 

Opinions  of  Our  Service:  There  is  a  great  difference  of 
opinion  among  our  manufacturers  as  to  the  value  of  our  consular 
service.  Many  of  those  engaged  in  the  foreign  trade  do  not  ship 
abroad  directly,  but  make  all  their  sales  through  commission 
houses ;  some  do  not  even  avail  themselves  of  the  opportunity  to  ob- 
tain the  published  consular  reports.  It  is  evident,  therefore,  that 
out  of  the  total  number  of  manufacturers  in  the  country,  the  por- 
tion that  comes  into  direct  contact  with  the  consular  work  is  small. 
For  reasons  already  indicated  in  part,  it  is  believed  that  this  will 
change  rapidly  and  that  the  service  will  be  an  increasingly  valuable 
aid  to  our  commerce. 

The  "American  Exporter,"  received  some  time  ago,  from 
manufacturers  and  exporters,  259  replies  to  an  inquiry  as  to  what 
they  thought  of  the  consular  service.  The  replies  showed  that, 
while  practically  all  are  engaged  in  the  foreign  trade,  less  than  65 
per  cent  receive  the  consular  reports,  and  that  only  about  40  per 
cent  made  any  attempt  to  follow  up  the  "Foreign  Trade  Oppor- 
tunities" there  presented.  Approximately  one-half  of  these  replies 
secured  results — a  remarkable  percentage,  everything  considered. 
The  replies  indicated  belief  in  the  growing  emancipation  from 
political  influence  and  the  consequent  widening  value  in  the  strug- 
gle for  foreign  markets.  No  wonder,  therefore,  that  in  answer  to 
the  question,  "Do  you  consider  the  reports  of  value  to  American 
Commerce?"  practically  all  replied  in  the  affirmative. 

While  these  letters  were  not  exactly  enthusiastic  endorsements, 
they  nevertheless  indicate  ground  for  hope.  In  reply  to  the  ques- 
tion, "From  w^hat  class  of  men  do  you  think  the  consular  corps 
should  be  recruited,  and  what  special  training  should  they  have  to 
be  of  value  to  the  country's  export  interest?"  the  answers  may  be 
grouped  as  follows : 

One  hundred  and  one  replied  that  the  service  should  be  re- 
cruited from  men  who  have  had  previous  business  and  manufactur- 
ing experience;  twenty  that  the  best  material  for  consular  ap- 
pointees is  to  be  found  among  the  employers  or  principals  of  ex- 


NATIONAL     BUSINESS     CONGRESS  65 


porting  commission  houses ;  four  advised  the  selection  of  traveHng 
men  who  have  had  foreign  experience ;  two  declared  themselves  as 
satisfied  witli  the  present  arrangement;  while  one  urged  that  ap- 
pointments be  made  on  political  and  partisan  grounds,  but,  as  he 
also  suggested  the  party  from  which  the  appointments  should  be 
made,  it  would  seem  that  this  manufacturer  intended  his  reply  to 
be  a  joke. 

Another  correspondent  advocated  the  selection  of  men  of  social 
position  and  independent  means.  Four  suggested  nothing  more 
specific  than  "appointments  after  special  training;"  four  others 
simply  said  that  the  consuls  must  speak  the  language  of  the  country 
to  which  they  are  sent;  three  favored  the  appointment  of  college 
graduates ;  and  two,  the  graduates  of  technical  schools.  One  said, 
in  a  general  way,  that  consuls  ought  to  have  a  wide  acquaintance 
among  American  manufacturers  engaged  in  the  export  trade;  and 
five  emphasized  the  necessity  of  increasing  salaries  so  as  to  secure 
the  highest  efficiency. 

This  opinion  is  in  accord  with  that  expressed  by  President 
]\Ionroe.  who  said  long  ago :  "When  we  deprive  our  consuls  of  the 
necessary  means  to  enter  the  social  circle  to  which  they  properly 
belong,  we  reduce  them  to  mere  ciphers." 

It  is  always  interesting  to  see  what  intelligent  foreigners  think 
of  us.  That  our  service  has  been  good  in  spots,  no  one  will  attempt 
to  deny,  but  Dr.  Vosberg-Rekow,  a  high  German  official,  thinks 
that  the  remarkable  growth  in  the  exports  of  our  manufactures  to 
Europe  is  due,  at  least  in  part,  to  the  effort  of  our  consuls.  He 
says:  "The  United  States  has  covered  Europe  with  a  network  of 
consulates  and  makes  its  consuls,  at  the  same  time,  inspectors  of 
our  exports  and  vigilant  sentinels  who  spy  out  every  trade  opening 
or  advantage  and  promptly  report  it."  The  German  agent  of  a 
large  American  manufacturing  house  thinks  that  our  service  is  still 
inferior,  in  results  produced,  to  the  German  system,  in  which  special 
commercial  agents  are  attached  to  the  consulates,  but  that  it  is 
superior  to  the  systems  of  France  or  Belgium. 

Hozv  Make  Effective:  Our  consular  service,  in  the  past,  has 
merited  both  the  censure  and  the  praise  which  has  been  heaped 
upon  it.  Like  other  parts  of  the  government  service  subject  to  the 
perniciousness  of  the  spoils  system,  it  has  recruited  to  its  ranks 
both  the  competent  and  the  incompetent,  both  wide  awake  men  of 
good  training  and  practical  experience,  and  a  large  corps  of  "re- 


66  NATIONAL     BUSINESS     CONGRESS 

spcctable,  indigent  gentlemen  who  have  failed  at  home."  Success- 
ful and  troublesome  local  politicians  have  too  often  expected  to  be 
rewarded  for  their  contributions  or  their  exertions  in  the  past  cam- 
paign by  a  soft  berth  in  some  foreign  country.  Needless  to  say 
such  appointees  did  not  look  forward  to  a  continuous  career  in 
which  intelligent  and  persistent  work  would  bring  retention  and 
promotion  in  the  service,  but  rather  to  four  years  of  sojourn  in  a 
foreign  country  as  a  reward  for  their  past  political  efforts. 

The  United  States  continued  its  consular  appointments  as  a  re- 
ward for  political  sen'ices  long  after  this  method  had  been  given  up 
by  the  leading  European  nations.  Witli  them  a  candidate  for  the 
consular  service  must  almost  always  be  a  graduate  of  some  recog- 
nized learned  institution,  often  must  have  had  some  experience  in  a 
commercial  house  or  institution,  and  then  must  pass  a  rigid,  com- 
petitive examination.  Once  admitted  to  the  service,  he  is  free  from 
political  pressure  and  can  hope  for  advancement  only  as  a  result  of 
meritorious  service. 

The  merit  svstem  has  much  to  commend  it.  It  is  incompara- 
bly better  than  the  spoils  system.  It  recognizes  the  desirable  prin- 
ciple of  selection  in  accordance  with  qualification,  and  promotion 
only  in  accordance  with  efficiency.  Now,  if  our  legislators  would 
only  see  it,  the  acceptance  of  the  merit  system  by  them  would  be 
good  politics;  for  when  a  senator  or  congressman  backs  one  indi- 
vidual for  a  position,  he,  of  course,  cannot  put  his  influence  behind 
any  other,  whereas  under  the  system  of  competitive  examinations, 
he  can  approve  of  as  many  candidates  as  wish  to  present  them- 
selves, leaving  the  final  selection,  of  course,  to  be  determined  by  the 
tests  undergone.  In  this  way  he  needs  offend  none,  while  actually 
encouraging  and  helping  the  most  meritorious. 

But  the  merit  system  will  not  of  itself  or  automatically  secure 
competent  officials.  It  is  necessary  to  provide  sufficient  induce- 
ments, honors,  and  rewards  to  make  the  service  attractive  to  the 
kind  of  men  who  are  capable  of  making  a  worthy  success  at  home. 
One  is  not  ordinarily  going  to  give  up  the  advantages  of  living  in 
his  own  country  and  with  his  own  people,  particularly  when  the 
opportunities  to  make  money  are  as  good  as  they  are  in  this  won- 
derful land  of  ours,  if  he  has  to  make  a  pecuniary  sacrifice  in  order 
to  do  so.  At  the  present  time,  the  compensation  in  the  two  lower 
classes  of  the  service  to  which  appointments  are  made  is  only  $2,000 
in  class  9  and  $2,500  in  class  8.     This  is  entirely  too  low.     These 


NATIONAL     BUSINESS     CONGRESS  67 


amounts  should  be  increased  by  at  least  50  per  cent.  When  the 
Chicago  Association  of  Commerce  wanted  a  representative  to  go  to 
South  America,  it  selected  one  upon  a  practical  merit  basis,  and 
then  paid  him  an  adecjuate  salary.  This  is  the  only  method  by 
which  we  can  get  competent  men  for  the  government  service. 

Furthermore,  in  my  opinion,  retiring  pensions  should  be  pro- 
vided. This  has  been  found  necessary  by  the  older  European  na- 
tions with  their  foreign  service,  and  it  would  be  particularly  help- 
ful in  retaining  in  our  service  men  who  could  look  forward  to  a 
life-time  career  without  facing  penury  when  they  were  ready  to  re- 
turn home  at  the  end  of  their  service. 

Another  very  desirable  feature  is  the  building  of  permanent 
legations  and  consulates  in  practically  all  foreign  countries.  Some 
years  ago  I  was  in  Hankow,  the  Chicago  of  Central  China. 
Driving  along  the  Bund,  I  saw  the  substantial,  permanent  buildings 
of  the  other  nations,  that  of  Russia  being  particularly  impressive, 
but  when  I  inquired  for  the  American  consulate,  I  had  some  dif- 
ficulty in  finding  it  in  a  little  rented  house  on  a  side  street.  When 
I,  myself,  went  to  Tegucigalpa,  the  capital  of  Honduras,  I  found 
the  consulate  housed  in  a  building  which  I  absolutely  would  not 
occupy.  It  was  only  after  a  long  search  that  I  was  able,  with  the 
small  amount  of  money  which  the  Department  could  provide  for 
rent,  to  obtain  a  well-located  and  fairly  commodious  house. 

I  have  said  nothing  so  far  about  the  general  training  for  our 
consular  officers.  Shortly  after  the  impetus  given  to  the  service  in 
1906,  a  number  of  our  universities  established  special  courses  of 
training  for  consular  and  diplomatic,  as  well  as  for  foreign  com- 
mercial positions.  Due  to  the  failure  so  far  of  Congress  to  enact  a 
comprehensive  civil  service  law  relating  to  the  service  and  to  a 
belief  in  some  quarters  that  the  merit  principles  had  been  applied 
in  a  somewhat  quixotic  way,*  this  excellent  plan  for  training  those 
looking  forward  to  the  foreign  service  has,  for  the  most  part,  been 
allowed  to  fall  into  disuse.  This  is  unfortunate,  for  our  consuls 
need  to  be  men  of  broad  general  training  and  culture  above  all  else. 

The  examinations,  as  laid  down  in  the  present  regulations,  are 
both  oral  and  written,  and  include  the  following  subjects:     Inter- 

*  For  example,  the  special  examinations  and  the  favoritism  shown 
in  assignments  and  promotions,  due  to  political  pressure.  The  loyalty 
and  devotion  on  the  part  of  those  actually  engaged  m  admmistermg 
the  service,  especially  the  efficient  director  and  the  chief  of  the  bureau, 
are   deserving  of   the   highest   commendation. 


68  NATIONAL     BUSINESS     CONGRESS 

national  law,  diplomatic  usage,  and  a  knowledge  of  at  least  one 
modern  language  other  than  English,  to-wit :  French,  Spanish  or 
German;  also  the  natural,  industrial,  and  commercial  resources  and 
the  commerce  of  the  United  States,  especially  with  reference  to  the 
possibilities  of  increasing  and  extending  the  trade  of  the  United 
States  with  foreign  countries;  American  history,  government,  and 
institutions;  and  the  modern  history  since  1850  of  Europe,  Latin 
America  and  the  Far  East.  The  object  of  the  oral  examination  is 
to  determine  the  candidate's  alertness,  general  contemporary  infor- 
mation, and  natural  fitness  for  the  service,  including  mental,  moral 
and  physical  qualifications,  character,  address  and  general  education 
and  good  command  of  English.  In  addition  to  the  foregoing  sub- 
jects, I  would  also  include  a  knowledge  of  the  fundamental  princi- 
ples of  law.  No  special  school  need  be  established  to  provide  the 
training  required  for  the  consular  service.  The  universities 
throughout  the  land  teach  practically  all  the  subjects  mentioned 
above  and  are  able  and  willing  to  train  candidates,  if  a  permanent, 
high-grade  service  is  securely  established. 

And  this  leads  me  to  say  that  in  my -opinion  it  is  unreasonable 
to  expect  our  consuls  to  be  technical  commercial  experts.  If  they 
were  this,  they  would  not  be  good  general  administrative  officers. 
Commercial  attaches  should  be  connected  with  all  our  larger  and 
more  important  consulates,  just  as  they  are  with  those  of  the  lead- 
ing European  countries.  These  attaches  are  charged  with  the  duty 
of  studying  how  to  advance  the  trade  of  their  countries.  As  yet, 
we  have  not  followed  this  worthy  practice.  The  European  coun- 
tries also  generally  have  a  much  larger  and  better  paid  staff  at  their 
consulates  than  we  have.  Thus,  the  German  consulate  general  in 
New  York  City  has  a  force  of  thirty  persons;  in  Chicago,  seven- 
teen; while  in  our  consulate-general  at  Berlin,  we  have  but  eight 
persons,  all  told.  As  a  result  of  this  inadequate  equipment,  our 
consuls  are  so  engaged  with  the  routine  work  that  they  have  but 
little  time  for  serious  study  and  investigation. 

Governmental  Co-Operation:  It  is  not  always  reahzed  how 
much  the  efifectiveness  of  the  consular  efforts  depends  upon  the 
organization  of  the  home  office.  If  this  is  adequately  equipped 
and  intelligently  directed,  much  can  be  accomplished,  but  if  the 
home  office  does  not  systematically  direct  the  consular  efforts,  sus- 
tain their  legitimate  endeavors  and  popularize  their  reports,  the 
work  in  the  field  will  accomplish  little.     Thus,  our  European  con- 


NATIONAL     BUSINESS     CONGRESS  69 

suls  were  recently  called  upon  to  report  the  cost  of  production  in 
their  districts.  They  were,  for  the  most  part,  unsuccessful  in  this 
quest  for  information,  but  nevertheless  did  secure  much  valuable 
material  which  the  home  office,  through  lack  of  funds,  was  not  able 
to  make  use  of.  As  with  the  consular  service  in  the  field,  so  with 
the  management  and  equipment  of  the  home  office,  there  has  been 
notable  improvement  of  late. 

In  Germany,  particularly,  the  co-operation  between  the  gov- 
ernment and  the  chambers  of  commerce  is  very  close  and  effective. 
This  may  be  due,  in  a  measure,  to  the  fact  that  in  Germany  the 
chambers  of  commerce  are  semi-official  bodies,  whose  functions  and 
activities  are  strictly  regulated  by  law.  They  serve  as  the  medium 
through  which  confidential  information  as  to  trade  openings  abroad 
is  communicated  to  manufacturers  and  exporters;  and  they  call  the 
attention  of  the  government  to  the  grievances  and  suggestions  of 
the  business  interests.  With  us  there  is  practically  no  provision  of 
systematic  co-operation  between  the  Department  of  Commerce  and 
Labor  and  the  various  commercial  and  trade  associations  which  are 
most  affected  by  its  work.  If  our  chambers  of  commerce  could 
help  to  disseminate  the  information  which  the  Department  receives, 
and,  on  the  other  hand,  could  advise  and  inform  the  Department  of 
the  needs  of  the  various  business  communities,  much  practical  ad- 
vantage would  result  from  this  co-operation. 

In  Germany,  the  Department  of  Commerce  is  presided  over  by 
a  director,  who  is  assisted  by  several  officials,  called  councilors,  each 
of  whom  is  charged  with  the  study  of  one  or  more  particular  sub- 
jects coming  within  the  scope  of  the  Department.  Thus,  one  studies 
transoceanic  commerce,  and  another  that  of  the  Far  East.  The 
councilors  are  not  called  upon  to  do  routine  office  work,  but  devote 
all  their  time  to  securing  information  relating  to  their  respective 
fields.  When  the  time  arrives  for  negotiating  a  commercial  treaty 
with  a  foreign  country,  or  of  framing  a  new  tariff  bill,  the  council- 
ors are  in  a  position  to  give  authoritative  information  upon  every 
topic  of  interest  to  German  trade.  Probably  the  most  important 
work  which  the  German  department  of  commerce  performs  for  the 
business  interests  directly,  is  in  connection  with  the  publication  of 
foreign  tariffs  and  of  consular  and  trade  reports.  These  are  so 
explicit,  so  carefully  gotten  up,  and  so  promptly  printed,  as  to  be  of 
great  practical  aid. 


70  NATIONAL    BUSINESS    CONGRESS 


A  means  successfully  used  by  some  European  countries  and 
Japan  for  promoting  their  foreign  trade  is  the  maintenance  of  com- 
mercial and  industrial  museums.  These  are  often  supported,  at 
least  in  part,  by  public  money  and  co-operate  actively  with  the  con- 
sular service.  They  contain  collections  of  samples  of  foreign  raw 
materials  and  manufactures.  They  thus  acquaint  manufacturers 
with  the  tastes  and  demands  of  the  foreign  consumer  and  thereby 
place  them  in  a  position  to  meet  foreign  competition  successfully. 
One  of  the  most  popular  of  such  museums  is  that  maintained  in 
Belgium.  In  addition  to  the  collections,  facilities  are  provided  for 
communicating  directly  with  the  consuls  on  any  subject  of  interest. 
The  replies  of  the  consuls  sent  in  this  way  have  created  for  the 
museum  a  place  of  distinct  usefulness. 

We  should  have  such  a  museum  here  in  our  country,  and  pre- 
ferably right  here  in  Chicago,  the  great  central  market.  It  should 
be  housed  in  an  adequate  building  of  its  own,  filled  wath  carefully 
selected  samples  of  the  products  of  foreign  countries  of  every  kind 
of  industry,  both  of  the  most  primitive  and  of  the  most  advanced. 
The  samples  should  be  chiefly  of  two  kinds:  the  raw  materials 
which  our  own  manufacturers  or  importers  can  use  to  advantage, 
and  the  wonderful  array  of  manufactured  goods  produced  in  this 
great  industrial  region.  A  museum  of  this  kind  should  gather  such 
information  from  all  parts  of  the  globe  as  would  be  helpful  to  our 
merchants  and  manufacturers.  It  should  likewise  be  made  a  center 
of  opportunity  open  to  all  to  consult  consuls,  commercial  attaches, 
and  other  officials  whenever  they  return  home.  Notice  of  such 
visits  could  easily  be  published,  and  those  interested  in  the  export 
trade  enabled  to  obtain  at  first  hand,  reliable  information  regarding 
records  and  trade  conditions  in  foreign  lands,  such  as  they  could 
scarcely  gain  in  any  other  way.  Such  a  museum  as  I  have  sug- 
gested would  be  a  splendid  work  for  this  League,  or  else  for  the 
Chicago  Association  of  Commerce,  to  undertake. 

Another  method  often  used  by  foreign  governments  is  that  of 
stimulating  the  establishment  in  other  lands  of  official  chambers  of 
commerce.  France  seems  to  have  been  the  leader  in  this  move- 
ment. There  are  more  than  twenty-five  such  bodies  receiving  aid 
from  its  treasury.  The  French  consul  is  usually  connected  with  the 
chamber  in  an  official  capacity.  The  semi-official  chambers  of  com- 
merce in  her  colonies  and  in  foreign  countries  have  not  only  been 
fruitful  sources  of  information,  but  are  centers  of  fresh  influence 


NATIONAL     BUSINESS     CONGRESS  71 


and  powerful  factors  in  the  development  of  foreign  trade.  Some- 
times the  home  chamber  of  commerce  will  organize  and  finance  a 
commercial  mission  to  some  foreign  territory  for  the  purpose  of 
establishing  close  business  relations  between  the  two.  Thus,  the 
chamber  at  Lyons  sent  such  a  commission  to  Southeastern  Asia  with 
the  result  of  placing  considerable  amounts  of  home  capital  and 
creating  a  good  demand  for  home  goods.  Again,  a  considerable 
part  of  the  funds  of  the  Paris  chamber  goes  to  the  maintenance  of 
commercial  schools  and  especially  the  endowment  of  traveling  fel- 
lowships to  deserving  graduates.  These  students  are  expected  to 
go  abroad  and  make  a  study  of  commercial  conditions,  reporting 
upon  the  same  when  they  return. 

The  League  Bill  and  the  Loivden  BUT.  You  are  aware  that 
the  first  act  passed  by  Congress  grading  and  classifying  the  consular 
service,  was  in  April,  1906.  Payment  by  fees  was  abolished  in  this 
reform  act  and  straight  salaries  ranging  from  $2,000  to  $12,000  a 
year  were  provided.  This  measure  marked  a  great  step  forward, 
but  unfortunately  the  vital  part,  providing  for  the  merit  system  in 
the  appointments  and  promotions,  was  stricken  out  of  the  bill  as 
enacted.  President  Roosevelt,  by  executive  proclamation  of  June 
27,  1906,  immediately  supplied  the  deficiency  by  providing  for  ap- 
pointment to  the  lower  grades  of  the  service  upon  examination,  and 
for  promotion  to  the  higher  grades  solely  upon  records  of  demon- 
strated efficiency. 

President  Taft,  by  executive  proclamation  of  November  26, 
1909,  confirmed  and  continued  the  good  work  of  his  predecessor. 
The  merit  system,  however,  is  still  provided  only  by  executive  proc- 
lamation and,  therefore,  liable  to  be  weakened  or  entirely  disre- 
garded by  any  successive  administration.  It  is  highly  important, 
therefore,  that  we  should  go  on  and  secure  what  has  been  given  us 
by  executive  proclamation  in  the  form  of  a  duly  enacted  legislation. 
The  public  interests  throughout  the  country  are  practically  unani- 
mous in  this  demand  and  no  one  can  doubt  that  public  opinion  wdl 
in  time  force  its  adoption.  But  we  should  get  this  law  at  this 
coming  session  and  not  have  it  delayed  any  longer. 

Now  there  will  again  be  at  least  two  bills  presented  at  this  ses- 
sion of  Congress:  the  Lowden  bill,  and  the  bill  drawn  up  and 
backed  by  this  League.  They  are  both  alike  in  that  they  provide 
for  grading  and  classifying  the  service,  for  holding  examinations 
and  for  efficiencv  records,  but  they  dififer  vitally  in  that  in  the  Low- 


12  NATIONAL     BUSINESS     CONGRESS 

den  bill  the  Secretary  of  State  is  required  only  to  report  the  names 
of  those  who  pass  the  examinations,  and  also  those  worthy  of  pro- 
motion, to  the  President,  who  may  or  may  not  make  his  appoint- 
ments and  promotions  from  that  list ;  while  the  League  bill  provides 
for  entrance  into  the  service  solely  on  the  basis  of  ability  and  ef- 
ficiency, as  shown  in  the  examinations,  to  which  candidates  have 
been  especially  designated  by  the  President,  and  likewise  for  pro- 
motion only  after  approval  by  the  examining  board,  which  shall  be 
advised  by  the  chief  of  the  consular  bureau  in  regard  to  the  ef- 
ficiency records  of  the  candidates  for  promotion. 

The  Lowden  bill  thus  has  the  great  objection  of  leaving  the 
President  open  to  political  pressure.  Indeed,  the  very  machinery 
of  examinations  and  records  could  be  used,  if  a  President  should 
so  desire,  as  a  cloak  behind  which  to  conceal  his  partisan  and  politi- 
cal appointments. 

Now,  the  objection  raised  by  ]\Ir.  Lowden  and  the  Committee 
on  Foreign  Affairs  of  the  House  to  the  mandatory  provisions  con- 
tained in  the  League  bill,  is  that  it  is  unconstitutional  in  that  it 
seeks  to  limit  the  powers  of  the  President  to  appoint  consuls,  sub- 
ject only  to  the  advice  and  consent  of  the  senate.  This  is  un- 
doubtedly a  serious  point  and  one  which  is  not  at  all  clear.  It  has 
been  stated,  however,  that  a  distinguished  constitutional  lawyer  has 
declared  that  there  is  no  valid  ground  for  the  contention  that  to 
oblige  the  President  to  designate  for  examination  and  then  to 
appoint  from  the  list  of  successful  candidates  limits  his  prerogative 
of  appointment.  And  this  would  seem  to  be  borne  out  by  the  fact 
that  both  President  Roosevelt  and  President  Taft  have  earnestly 
recommended  that  such  provisions  be  enacted  into  the  law.  If,  how- 
ever, the  Foreign  Committee  becomes  convinced  that  such  grave 
constitutional  objections  to  the  measure  are  insurmountable,  it  would 
be  entirely  feasible  for  both  houses  of  Congress  to  pass  a  resolution 
declaratory  of  the  way  in  which  access  to  the  service  can  be  gained 
and  the  service  in  general  conducted.  No  President  would  want  or 
would  dare  to  act  contrary  to  the  will  of  the  people  thus  ex- 
pressed. 

There  is  no  doubt  that  the  business  interests  of  the  country  are 
becoming  thoroughly  alive  to  the  necessity  of  having  an  efficient, 
non-political  consular  service.  They  have  sustained  and  encour- 
aged every  effort  which  has  been  made  to  put  the  service  upon  a 
purely  business  basis.     The  press  has  been  generous  in  its  treat- 


NATIONAL     BUSINESS     CONGRESS  IZ 

ment  of  the  proposed  legislation,  and  it  seems  entirely  improbable 
that  we  shall  ever  again  go  back  to  the  spoils  system,  but  rather 
that  the  present  status,  secured  by  executive  proclamation,  will  be 
enacted  into  law.  A  trained  and  efficient  foreign  service,  effectively 
administered  at  Washington  and  actively  supported  by  our  com- 
mercial interests,  and  backed  up  by  an  aggressive  public  opinion,  is 
of  inestimable  value  to  the  growth  and  prosperity  of  our  foreign 
trade.      (Applause.) 

The  Chairman:  Is  there  any  discussion  of  this  subject, 
Gentlemen  ? 

If  not,  we  will  stand  adjourned  until  10:30  o'clock  tomorrow 
morning. 

Whereupon  an  adjournment  was  taken  until  December  12, 
1911,  at  the  hour  of  10:30  o'clock  a.  m. 


74  NATIONAL     BUSINESS     CONGRESS 


THIRD  SESSION. 


Tuesday,  December  12,  1911. 
10:30  o'clock  A.  M. 

The  meeting  was  called  to  order  by  Chairman  Sheldon. 

The  Chairman  :  Gentlemen,  after  our  successful  day  of  yes- 
terday, we  are  looking  forward  today  to  accomplish  much  more. 
Is  there  any  business  to  come  before  the  meeting? 

Mr.  Frost  :  Gentlemen,  if  we  are  to  accomplish  anything  by 
these  meetings,  if  we  are  to  get  something  done,  we  must  get  back 
of  this  action,  and  in  order  to  do  that  it  is  necessary  to  see  that  the 
program  that  we  formulate  be  sane  and  safe.  This  can  only  be 
accomplished  by  those  things  we  hold  in  common ;  and,  therefore, 
it  is  necessary  that  the  resolutions  that  the  committee  formulate 
should  be  gone  over  by  the  different  members.  And  it  is  necessary 
that  we  begin  our  labors  as  early  as  possible,  in  order  that  the  last 
day  some  legislative  program  may  be  submitted  that  will  meet  with 
your  approval,  and  back  of  all  of  which  we  can  stand  and  push  it 
to  a  successful  culmination  in  the  Congress;  and,  therefore.  Air. 
Chairman,  I  offer  a  resolution  that  the  Chair  appoint  a  committee 
of  five  on  resolutions,  with  authority  to  draft  and  to  submit  to  this 
body,  for  its  approval,  a  program  of  action  to  be  taken  by  the  body. 

Alotion  duly  seconded. 

The  Chairman  :     You  have  heard  the  motion.     All  in  favor 
say  Aye.     Contrary,  No. 
Motion  carried. 

The  Chairman  :  The  Chair  will  name  as  Committee  on 
Resolutions :  Mr.  A.  P.  Nevin,  of  New  York,  Attorney  for  the 
National  Association  of  ^Manufacturers;  Mr.  W.  H.  Stackhouse,  of 
the  French  &  Hecht  Wheel  Manufacturing  Company,  Springfield, 
Ohio;  Mr.  Otto  H.  Faulk,  iron  founder,  Milwaukee,  Wisconsin; 
Mr.  Charles  B.  Boothe,  merchant,  Los  Angeles,  California ;  Mr.  E. 
Allen  Frost,  Chairman,  General  Counsel  of  the  National  Business 
League  of  America. 

You  have  heard  the  list  of  names  for  the  Committee  on  Reso- 
lutions.    On  motion  approved. 


NATIONAL    BUSINESS    CONGRESS  75 

Gentlemen  of  the  Congress :  We  will  now  listen  to  an  address 
by  Mr.  John  Kirby,  Jr.,  President  of  the  National  Association  of 
Manufacturers,  on  "THE  RELATION  OF  INDUSTRIAL 
ABUSES  TO  OUR  FOREIGN  AND  DOMESTIC  TRADE." 

(Applause.) 

Mr.  John  Kirby,  Jr.  :  Mr.  Chairman  and  Gentlemen  :  I  would 
not  dare  trust  myself  to  talk  to  a  body  of  men  such  as  are  as- 
sembled here  without  putting  what  I  have  to  say  in  writing,  and 
while  you  have  my  sympathies  in  having  to  listen  to  what  I  have 
written,  I  hope  when  I  get  through  it  will  make  some  impression 
upon  your  minds,  and  that  you  will  not,  some  of  you  at  least,  say, 
as  many  have  said,  "he  is  rabid  and  a  radical  and  talks  too  plain." 
I  am  going  to  talk  plainly,  and  I  think,  in  view  of  the  recent  devel- 
opments and  the  newspaper  editorials  that  have  appeared  in  the 
country  during  the  last  ten  days,  that  I  certainly  cannot  outdo  some 
of  the  newspaper  editors  in  radicalism. 

This  gathering  of  business  men,  representing  practically  every 
department  of  trade  and  commerce,  has  assembled  in  this  great  com- 
mercial and  industrial  center  from  all  parts  of  the  United  States, 
for  a  purpose. 

Now,  what  is  that  purpose?  Is  it  merely  for  an  interchange 
of  views  with  respect  to  ways  and  means  by  which  we  may  extend 
our  trade  with  foreign  countries?  I  think  not.  True,  that  is  one 
of  the  subjects  of  our  meeting  here,  but  there  are  men  in  attend- 
ance who  would  not  be  here  if  that  were  the  only  subject  they  ex- 
pected would  be  discussed  at  this  congress. 

The  fact  of  the  matter  is,  things  are  in  an  abnormal  condition 
in  this  country.    Political  and  social  chaos  prevails  in  this  land. 

We  seem  to  be  troubled  with  economic  convulsions  for  which 
every  man  appears  to  be  hunting  a  remedy  and  an  avenue  of 
escape. 

On  the  one  hand  is  the  government  making  the  lives  of  the 
managers  of  our  great  corporations  miserable  from  fear  that  they 
will  be  dressed  up  in  clothes  that  are  distasteful  to  them,  while,  on 
the  other  hand,  is  the  multitude  insisting  that  many  men  who 
have  been  successful  in  business  shall  be  compelled  to  don  the  livery 
of  the  "pen." 


76  NATIONAL    BUSINESS     CONGRESS 

A  PANACEA  FOR  ILLS. 

We  seem  to  have  gotten  tired  of  the  institutions  which  have 
made  possible  the  great  prosperity  this  nation  has  enjoyed.  Many 
people  seem  to  have  become  imbued  with  the  idea  that  these  institu- 
tions are  back  numbers,  and  that,  because  they  afford  opportunity 
for  the  poor  man  of  today  to  become  the  well-to-do  or  the  rich  man 
of  tomorrow,  they  should  be  discarded  for  something  very  much 
older,  but  disguised  as  new ;  and  that  something,  they  know  not 
what,  should  take  the  place  of  these  tried  and  successful  institu- 
tions, in  the  hope  that  a  panacea  for  the  ills  of  society  may,  per- 
chance, be  found. 

Some  people  have  an  idea  in  their  minds  that  to  make  a  rich 
man  poor  is  the  way  to  make  a  poor  man  rich,  and  their  whole  line 
of  action  is  in  that  direction.  They  covet  riches,  but  they  are  mis- 
guided in  their  notions  about  how  to  acquire  them,  and  they  go 
about  strewing  the  road  to  success  with  thorns  and  thistles,  and  bar- 
ricading the  avenues  which  lead  to  opportunity  and  wealth.  Such 
people  have  always  existed  and  they  will  always  exist;  but,  just  at 
this  time,  they  seem  to  have  taken  on  a  new  lease  of  life  and  in- 
haled an  unusually  large  gust  of  discontent.  Some  of  them  are 
more  or  less  sincere  in  their  theories  about  how  society  should  be 
organized  and  regulated  in  order  to  provide  a  more  equal  distribu- 
tion of  wealth,  but  many  of  them  are  manifestly  demagogues  who 
prey  upon  ignorance  and  "who  favor  anything  to  get  coon."  They 
would  destroy  confidence,  yes  they  have  destroyed  it.  They  would 
turn  the  nation  upside  down  or  reverse  its  progress  and  develop- 
ment in  an  effort  to  promote  their  own  greedy  and  selfish  interests. 
They  march  up  and  down  the  land  inflaming  the  masses  against  our 
established  institutions,  and  preaching  Socialism  under  the  guise 
of  progressivism,  just  because  they  think  it  is  popular,  and  will 
help  them  to  reach  their  goal. 

The  muckrakers,  the  yellow  journals,  the  so-called  uplift 
magazines,  have  filled  the  minds  of  the  people  with  the  most  fal- 
lacious and  Socialistic  ideas  about  the  great  harm  "the  interests," 
the  great  business  activities  upon  which  labor  is  dependent  for  em- 
ployment, and  trade  and  commerce  for  activity,  are  doing  the  com- 
mon people,  whereas,  as  a  matter  of  fact,  the  people  would  be  much 
more  "common"  than  they  are  now  were  it  not  for  these  "interests" 
and  the  captains  of  industry  who  direct  their  management ;  indeed, 
they  would  soon  find  the  level  of  the  Mexican  peon. 


NATIONAL     BUSINESS     CONGRESS  11 


The  present  ills  of  society  are  more  imaginary  than  real,  and 
are  not  the  result  of  any  real  cause.  They  have  their  existence 
largely  in  the  imagination  of  the  agitator  and  the  "space-writer," 
who  live  and  thrive  by  sowing  the  seeds  of  discontent,  envy,  malice 
and  Socialism. 

This  muckraking  and  efforts  of  agitators  to  overthrow  existing 
conditions  are  not  of  recent  origin ;  indeed,  they  have  existed  since 
the  beginning  of  recorded  time;  always  ready  and  anxious  to  de- 
stroy the  beneficent  work  of  others,  obstruct  the  onward  march  of 
progress,  and  develop  chaos. 

To  illustrate  the  fact  that  the  existence  of  these  evil  conditions 
and  the  enemies  of  the  peace  and  welfare  of  society  who  develop 
them  are  not  of  recent  origin,  I  will  quote  from  a  speech  delivered 
in  the  United  States  Senate  more  than  seventy-eight  years  ago,  by 
Daniel  Webster,  in  which  that  illustrious  Senator  said : 

^  "There  are  persons  who  constantly  clamor.  They  com- 
plain of  oppression,  speculation  and  the  pernicious  influence  of 
accumulated  wealth. 

"They  cry  out  loudly  against  all  banks  and  corporations, 
and  all  the  means  by  which  small  capitals  become  united,  in 
order  to  produce  important  and  beneficial  results.  They  carry 
on  a  mad  hostility  against  all  established  institutions.  They 
would  choke  up  the  fountains  of  industry,  and  dry  all  its 
streams. 

"In  a  country  of  unbounded  liberty  they  clamor  against 
oppression.  In  a  country  of  perfect  equality,  they  would  move 
heaven  and  earth  against  privilege  and  monopoly.  In  a  coun- 
try where  property  is  more  equally  divided  than  anywhere  else, 
they  rend  the  air  with  the  shouting  of  agrarian  doctrines.  In 
a  country  where  the  wages  of  labor  are  high  beyond  all  paral- 
lel they  would  teach  the  laborer  that  he  is  but  an  oppressed 
slave.  Sir,  what  can  such  men  want?  What  do  they  mean? 
They  can  want  nothing,  sir,  but  to  enjoy  the  fruits  of  other 
men's  labors.  They  can  mean  nothing  but  disturbance  and  dis- 
order, the  diffusion  of  corrupt  principles,  and  the  destruction 
of  the  moral  sentiments  and  moral  habits  of  society.  A  licen- 
tiousness of  dealing  and  of  action  is  sometimes  produced  by 
prosperity  itself.  Men  cannot  always  resist  the  temptations 
to  which  they  are  exposed  by  the  very  abundance  of  bounties 
of  Providence  and  the  very  happiness  of  their  own  condition." 


NATIONAL     BUSINESS     CONGRESS 


ARE  WE  HEWING  TO  HAPHAZARD  LINES? 

As  fitting  as  these  words  were  to  the  conditions  of  the  times 
in  which  they  were  uttered,  they  are  no  less  appropriate  to  the  con- 
ditions existing  today. 

Many  people  who  have  not  shared  in  the  prosperity  of  the 
country  to  the  full  extent  wliicli  they  think  they  should  have  done, 
attribute  the  failure  to  realize  their  hopes  and  expectations  to  what 
they  choose  to  call  "the  system."  That  is  to  say,  the  basis  upon 
which  society  and  business  are  organized.  They  never  stop  to  ask 
whether  the  real  cause  is  not  inherent  in  themselves,  or  whether,  if 
society  were  organized  along  the  lines  of  their  own  ideas  they 
would  be  better  or  worse  ofif  than  they  are.  Such  people  are  always 
ready  listeners  to  the  oily  tongue  of  the  theorist  and  the  demagogue 
and  receptive  of  their  specious  arguments.  They  are  experts  at 
destruction,  but  for  construction  they  rely  on  the  men  and  the  sys- 
tem they  so  bitterly  condemn. 

Our  forefathers  marked  a  line,  and  as  long  as  we  hewed  to  it 
the  nation  progressed,  but  we  seem  to  have  lost  that  line  and  are 
now  hewing  to  haphazard  and  broken  lines. 

What  the  result  will  be  if  we  keep  on  in  that  way  we  can  only 
predict.     But  it  is  most  likely  to  be  chaotic  and  disastrous. 

FOREIGN  AND  DOMESTIC  TRADE. 

Coming  now,  more  specifically,  to  the  subject  assigned  to  me: 
"The  Relation  of  Industrial  Abuses  to  Our  Foreign  and  Domestic 
Trade,"  I  wish  to  direct  your  attention  to  some  points  of  interest 
in  connection  with  our  standing  in  foreign  markets. 

We  have  arrived  at  a  \yonderful  period  in  our  industrial  de- 
velopment. A  period  where  many  problems  confront  us  that  are 
pressing  for  solution  to  a  greater  degree  perhaps  than  ever  before, 
and  some  of  these  problems  are  comparatively  new.  Among  them 
is  the  manner  and  extent  to  which  men  and  capital  may  combine  or 
unite  for  the  development  of  industry  and  the  conservation  of 
energy,  the  securing  of  adequate  monetary  returns  and  at  the  same 
time  meet  the  just  requirements  of  the  laws  of  the  land,  as  express- 
ing the  interests  of  the  whole  body  of  the  people. 

Another  problem  is  the  relations  of  the  employer  and  the  em- 
ployed, and  the  methods  by  which  they  can  work  in  harmony  and 
further  their  mutual  interests. 


NATIONAL     BUSINESS     CONGRESS  79 

A  third  is  the  problem  of  wider  markets  for  the  products  of 
our  mills  and  factories  as  well  as  our  farm  products. 

At  this  time  many  great  industries  not  only  have  the  capacity 
to  supply  all  the  present  and  immediately  prospective  requirements 
of  the  United  States,  but  have  a  surplus  capacity  adequate  to  meet 
the  need  of  a  much  larger  population. 

To  utilize  the  surplus  capacity,  therefore,  we  need  to  exploit 
the  markets  of  foreign  lands. 

This  is  a  trite  topic  in  many  respects,  for  the  desirability  of 
securing  foreign  markets  has  been  preached  to,  and  urged  upon,  the 
business  men  of  this  country  by  diplomats,  statesmen,  consuls  and 
editors  of  trade  papers  for  many  years.  According  to  some  of  the 
most  ardent  advocates  of  export  trade,  the  American  manufacturer 
has  been  derelict  in  his  duties  in  that  respect.  To  accept  this  as  a 
truth  would  be  to  accept  a  greatly  exaggerated  statement.  What- 
ever may  be  the  shortcomings  of  the  individual  manufacturers, 
taking  the  manufacturing  class  as  a  body,  they  have  done  as  well  in 
exploiting  foreign  markets  as  their  rivals  of  other  countries,  under 
the  conditions  which  have  surrounded  and  do  surround  the  indus- 
tries of  this  country. 

It  is  not  the  business  of  the  manufacturer  to  cultivate  export 
trade  merely  for  the  sake  of  saying  that  he  is  an  exporter.  It  is 
his  business  to  so  utilize  his  resources  and  capacity  as  will  bring 
the  most  beneficial  and  lasting  results  to  himself,  his  associates  and 
his  employes,  wdiether  the  market  be  local,  country-wide  or  world- 
w'ide. 

To  say  that  this  country,  or  that  country,  leads  the  United 
States  in  the  exports  of  this  or  that  article  or  commodity,  means  but 
little ;  it  does  not  necessarily  mean  that  that  country  is  more  pros- 
perous, or  the  exporting  manufacturer  more  successful,  or  the  vol- 
ume of  business  larger  than  that  of  the  manufacturer  of  like  com- 
modities in  this  country,  who  may  not  have  sought  foreign  fields. 

Too  little  thought  is  given  by  the  critic  of  the  American  manu- 
facturer to  the  enormous  extent  of  our  home  market,  and  to  the 
rapidity  with  which  it  grows  over  a  period  of  years. 

Nevertheless  it  is  wise  forethought  in  manufacturing  and  mer- 
chandising to  cultivate  as  broad  a  field  as  is  ])racticable.  in  order  to 
be  prepared  for  local  or  transitory  changes,  which  at  one  time  or 
another  will  be  aflfecting  the  particular  or  local  markets  of  every 
industrv. 


80  NATIONAL     BUSINESS     CONGRESS 

Therefore,  personally,  and  as  representing  the  great  Association 
of  which  I  have  the  honor  to  be  President,  I  am  heartily  in  favor  of 
encouraging  the  serious  efiforts  made  by  our  manufacturers  in  seek- 
ing the  trade  of  other  lands.  In  fact,  the  National  Association  of 
Manufacturers,  when  organized  sixteen  years  ago,  made  special 
efforts  to  provide  the  manufacturers  of  that  day  with  the  informa- 
tion and  personal  service  which  would  enable  them  to  intelligently 
look  into  the  possibilities  of  the  foreign  field,  and  that  work  has 
always  been  maintained  as  an  important  branch  of  the  activities  of 
the  Association. 

If  we  glance  at  the  records  of  our  export  trade  at  the  time  that 
Association  was  formed  and  compare  them  with  the  records  of  the 
present  dav,  we  shall  see  that  we  have  made  great  advances  as  an 
exporting  nation  in  manufactured  products,  and  that  advance  has 
been  due  to  the  manufacturers  themselves  in  the  individual  efforts, 
and  in  their  co-operation  through  such  bodies  as  the  National  As- 
sociation of  Manufacturers,  in  providing  ways  and  means  for  the 
use  of  intelligent  effort  in  the  export  field. 

To  specify,  let  me  give  you  some  comparisons  of  the  exports 
of  some  of  our  manufactured  articles.  For  instance:  in  agricul- 
tural implements,  our  exports  from  the  period  mentioned,  1895,  to 
the  present  time,  have  increased  about  seven-fold;  our  exports  of 
cars,  carriages  and  vehicles  generally  are  thirteen  times  greater; 
those  of  drugs  and  chemicals  have  trebled ;  while  in  the  exports  of 
manufactured  copper  there  has  been  a  more  than  seven-fold  in- 
crease, showing  that  we  are  well  living  up  to  our  advantages  in  this 
respect  as  the  great  copper  producing  country. 

In  the  textile  lines,  where  individual  skill  of  the  operative  is  so 
great  a  factor,  it  is  encouraging  to  note  that  our  exports  of  manu- 
factured cotton  have  trebled  in  this  period.  In  the  manufactures 
of  rubber,  the  raw  material  for  which  we  must  seek  from  another 
land,  the  increase  has  been  eight-fold;  in  scientific  instruments, 
where  not  only  individual  skill,  but  a  high  order  of  intelligence  is 
necessary  for  their  manufacture,  the  increase  has  been  more  than 
six-fold;  in  the  great  industry,  where  skill,  intelligence  and  capital 
are  so  largely  required  and  which  goes  so  far  to  promote  the  com- 
forts of  mankind,  viz.:  manufactures  of  leather,  the  increase  has 
been  far  more  than  three-fold.  In  another  article  which  promotes 
the  health  of  mankind  through  cleanliness,  viz.:  soap,  our  exports 
have  more  than  trebled  in  this  period,  while  in  the  great  wood- 


NATIONAL     BUSINESS     CONGRESS  81 

working  industries,  where  it  is  quite  natural  that  we  should  be 
looked  upon  as  prominent,  our  exports  have  advanced  nearly  four- 
fold. 

In  the  great  iron  and  steel  industries,  the  ones  in  which  in  many 
lines  there  has  been  the  keenest  competition  with  foreign  nations, 
the  combination  of  American  capital,  highly  trained  labor,  intelli- 
gent utilization  of  resources  and  systematic  cultivation  of  foreign 
markets  has  resulted  in  a  seven-fold  increase  in  the  value  of  our 
iron  and  steel  exports  in  1911,  as  compared  with  1895. 

Xow,  these  figures  are  merely  multiples  of  comparatively  small 
quantities  in  the  earlier  year,  but  in  all  the  instances  cited,  the  ex- 
port values  amount  to  many  millions  of  dollars,  making  a  grand 
total  in  1911,  of  over  $900,000,000  for  the  exports  of  manufactured 
and  partly  manufactured  goods  of  this  country,  or  nearly  half  of 
our  total  exports. 

I  have  referred  to  these  increases  in  our  exports  as  a  proof 
that  the  American  manufacturer  has  by  no  means  been  asleep  in 
finding  a  market  in  foreign  countries  for  his  goods. 

If  you  will  compare  these  figures  with  the  increases  in  the 
export  of  like  articles  from  rival  manufacturing  nations,  you  will 
find  them  by  no  means  discreditable  to  the  efiforts  of  our  manu- 
facturers in  securing  foreign  markets. 

But  our  enterprise  in  meeting  home  requirements,  and  provid- 
ing in  many  cases  increased  capacity  in  advance  of  these  require- 
ments, makes  it  practicable  and  desirable  to  seek  still  more  strenu- 
ously for  foreign  outlets  for  our  manufactured  goods. 

We  have  many  suggestions  ofifered  and  measures  advocated  for 
aiding  in  this  work.  Some  go  so  far  as  to  say  that  we  cannot 
greatlv  increase  our  trade  unless  we  have  our  own  Merchant  Ma- 
rine, American  banks  abroad,  reciprocity  treaties  with  foreign 
countries,  and  more  efifective  consular  service,  etc. 

Our  manufacturers  as  a  body,  and  particularly  the  National 
Association  of  ^Manufacturers,  are  always  ready  to  lend  their  influ- 
ence to  promote  these  and  other  measures  that  will  be  for  the  best 
interests  of  our  industries  and  the  country  in  general. 

But  we,  as  manufacturers,  realize  that  whatever  aid  may  be 
given  us  through  government  or  other  outside  sources,  it  remains 
with  us  individually  to  secure  the  orders  which  may  be  available  for 
the  manufactured  goods  of  the  United  States — that  is  we  must  go 


82  NATIONAL    BUSINESS     CONGRESS 

after  the  business  ourselves,  or  seek  it  through  our  own  direct  rep- 
resentatives or  agents. 

There  are  few  instances  in  which  the  lack  of  American  owned 
or  controlled  transportation  or  banking  facilities  prevent  our  manu- 
facturers from  competing  on  practically  even  terms  with  those  of 
rival  nations,  but  wherever  we  can  improve  those  facilities  to  our 
own  advantage,  we  should  lend  our  influence  to  bring  about  that 
improvement. 

There  is  one  influence  which  is  as  potent,  if  not  more  so,  than 
any  above  referred  to,  for  affording  opportunities  and  encouraging 
the  use  of  American  products  in  foreign  lands.  I  refer  to  the  in- 
vestment of  American  capital  in  foreign  countries. 

Our  own  capital  requirements,  until  comparatively  recently, 
have  been  so  great  as  not  only  to  remuneratively  absorb  the  avail- 
able money  of  this  country,  but  have  also  caused  us  to  draw  largely 
on  the  capital  of  the  older  nations  of  the  world.  Now,  however, 
American  capital  is  seeking  investment  in  Canada,  Mexico  and 
South  America.  We  all  know  the  excellent  results  of  our  large  in- 
vestments in  Canada.  We  also  have  a  pretty  fair  idea  of  the  re- 
turns to  this  country  of  the  $750,000,000  invested  in  Mexico. 

It  is  now  estimated  that  there  is  $150,000,000  in  Cuba;  $50,- 
000,000  in  Brazil ;  $40,000,000  in  Argentina ;  $35,000,000  in  Peru ; 
and  $40,000,000  in  Central  America. 

A  glance  at  the  increase  of  our  exports  to  these  lands  will  show 
that  these  investments  have  had  their  influence  in  increasing  the  use 
of  our  manufactured  products  therein. 

The  market  for  British  goods  in  Latin-America  has  been 
largely  created,  and  to  a  great  extent  maintained,  by  the  invest- 
ment of  British  capital  in  the  railroads  and  other  enterprises  of  that 
region. 

In  recent  years,  important  concessions  for  railroads  have  been 
granted  to  Americans  in  Brazil  and  Uruguay,  and  the  result  is  that 
as  these  railroads  have  been  started  and  built  there  have  been  op- 
portunities (which  opportunities  have  been  taken  advantage  of), 
for  the  equipment  of  those  roads  with  American  locomotives,  cars 
and  numerous  other  articles  necessary  for  railroad  purposes. 

But  it  is  not  in  Latin-America  alone  that  the  American  manu- 
facturer has  opportunities  for  a  lucrative  market,  great  as  these  op- 
portunities are  and  rapidly  as  they  will  grow. 


NATIONAL    BUSINESS     CONGRESS  83 


There  are  other  lands  which  are  developing,  some  of  which  a 
few  years  ago  were  looked  upon  as  almost  valueless  for  many 
classes  of  manufactured  goods.     I  refer  particularly  to  China. 

When  the  political  troubles  now  rife  in  China  are  settled,  as  we 
trust  they  will  be  in  the  best  interests  of  the  people,  and  maintain- 
ing the  territorial  integrity  of  the  country — there  will  be  seen  there, 
in  a  comparatively  short  time,  industrial  development  which  those 
fairly  familiar  with  China  a  few  years  ago  would  scarcely  have 
believed  possible. 

But  progress  is  in  the  air  in  all  regions  of  the  earth.  The 
oriental  nations  are  becoming  imbued  with  the  Eastern  spirit  of 
enterprise,  and  to  some  extent,  its  materialism.  This  also  means  in 
nearly  all  countries  the  development  of  manufacturing  industries 
within  their  borders.  But  this  need  not  alarm  us  as  a  nation  if  we 
can  secure  fair  treatment  as  against  competitors  in  the  markets  of 
those  countries. 

The  gradual  development  of  manufacturing  industries  in  other 
lands  tends  to  provide  a  market  for  a  wider  range  of  manufactured 
articles  necessary  to  the  growth  and  continuance  of  these  industries, 
and  at  the  same  time  educate  the  people  of  those  countries  to  an 
appreciation  of  a  higher  and  better  quality  of  goods,  which  will 
always  be  demanded  and  supplied  by  nations  having  the  intelligence 
and  enterprise  which  will  enable  them  to  keep  in  advance  of  rivals 
in  industrial  achievement. 


RESPONSIBILITY   OF  INDUSTRIAL  ABUSES. 

Speaking  more  specifically  of  the  relation  of  industrial  abuses 
to  our  foreign  and  domestic  trade,  there  are,  of  course,  numerous 
forms  of  industrial,  as  well  as  commercial  abuses,  which  might  be 
dealt  with  in  lengthy  detail,  but  I  shall  call  your  attention  only  to 
those  which  more  seriously  affect  the  cost  of  our  wares,  and  whose 
tendencies  are  to  produce  results  detrimental  to  our  interests  as  a 
nation  in  trade  competition  with  other  countries. 

.  A  great  hue  and  cry  extends  from  one  end  of  this  land  to  the 
other,  and  the  country  is  rife  with  protests  against  and  in  denuncia- 
tion of  so-called  business  trusts.  Practically  every  industrial  aggre- 
gation is  dubbed  a  trust.  There  appears  to  be  little,  if  any,  dis- 
crimination   made    between    them.     Every    large   corporation    and 


84  NATIONAL    BUSINESS     CONGRESS 

every  successful  man  is  paraded  as  a  trust  unit,  and  all  are  made 
the  target   for   muckrakers,   charlatan   politicians   and   disgruntled 

cranks. 

BRAINS   AND   CAPITAL. 

It  is  to  the  combination  of  brains  and  capital  more  than  all 
else  that  this  country  owes  its  wonderful  and  rapid  development, 
and  to  the  vast  opportunities  for  labor  and  capital  that  have  been 
recently  opened  up  as  never  before  in  its  history.  But  because 
some  men  seize  these  opportunities,  while  others  do  not  see  them, 
or,  if  they  do,  fail  to  grasp  them,  they  are  heralded  as  enemies  of 
the  common  people,  and,  because  of  the  seeming  popularity,  legis- 
lative restrictions  are  thrown  around  about  their  thrifty  and  enter- 
prising tendencies. 

BENEFIT  OF  LARGE  CORPORATIONS. 

However  great  may  be  the  fault  found  with  some  large  corpo- 
rations, the  operations  of  many  of  them  seem  to  have  been  bene- 
ficial, rather  than  otherwise,  to  the  common  good. 

Do  not  misunderstand  me !  I  am  not  defending  combinations 
or  individuals  who  intrude  upon  the  rights  of  others,  nor  those  who 
carry  on  their  operations  in  violation  of  the  laws  of  the  land,  or  in 
restraint  of  trade  and  commerce.  That  is  not  the  purpose  of  my 
reference  to  this  subject.  It  would,  indeed,  be  a  dangerous  thing 
for  this  country  to  ignore  or  permit  the  unrestricted  power  of  great 
corporations  or  combinations,  whether  of  capital  or  labor,  in  the 
monopoly  of  commerce  and  industry,  or  in  the  monopoly  of  the 
labor  market,  and  proper  restrictive  legislation  should  and  must 
protect  the  citizens  against  the  use  and  opportunity  to  use  such 
power,  but  the  difficulty  lies  in  drawing  the  line. 

THE    SHERMAN    ACT. 

Let  us  reason  together  for  a  moment.  The  Sherman  law  was 
enacted  in  1900,  just  at  the  beginning  of  the  so-called  trust  era 
in  this  country.  Many  of  the  large  corporations  now  being  prose- 
cuted, or  which  have  been  prosecuted  under  its  provisions,  have 
formed  since  that  time,  and  in  accordance  with  the  advice  of  the 
best  legal  talent  obtainable. 

Now,  it  seems  that  the  literal  enforcement  of  that  law  operates 
to  destroy  a  business  policy  which  has  proven  to  be  the  mainspring 


NATIONAL     BUSINESS     CONGRESS  85 


of  our  national  greatness,  for,  during  the  era  of  large  business  cor- 
porations and  combinations,  this  country  has  advanced  and  our 
foreign  trade  increased  to  proportions  never  before  dreamed  of. 

As  a  single  illustration  of  the  far-reaching  advantages  to  be 
realized  from  these  great  enterprises,  I  will  refer  to  a  personal  in- 
stance. In  1881,  I  had  occasion  to  go  to  my  grocer  and  procure  a 
gallon  of  kerosene  oil  for  which  I  paid  40  cents.  I  can  now  buy 
the  same  quantity  of  a  much  better  grade  of  kerosene  oil  for  10  or 
12  cents,  and  I  am  wondering  how  long  the  latter  price  will  prevail 
under  the  dissolution  plan  reverting  the  Standard  Oil  Company  into 
its  original  34  separate  parts. 

But  it  is  not  my  purpose  to  discuss  the  Sherman  law,  nor  the 
prosecutions  which  are  being  enforced  under  it.  There  are  other 
speakers  here  to  whom  that  subject  has  been  assigned.  But.  as 
bearing  upon  my  own  subject,  it  is  fitting  that  I  should  refer  to  it 
and  to  say  that  the  real  abuses,  possible  if  not  probable,  to  which 
monopoly  in  trade  may  lead  should  be  guarded  against  by  proper 
legislation,  lest  those  abuses  prove  a  barrier  to  both  foreign  and 
domestic  trade. 

We  should  remember  that  it  was  ruthless  competitive  methods 
that  forced  business  combinations  into  existence,  and  if  my  experi- 
ence teaches  me  anything,  it  is  that  a  return  to  those  methods  will 
retard  our  development  and  lessen  our  export  trade,  for  it  is  now 
an  established  fact  that  large  aggregations  in  industry  can  produce 
more  cheaply  than  can  segregated  units  in  the  same  kind  of  manu- 
facture, hence  they  are  in  better  position  to  extend  the  export  trade 
of  the  country. 

A  few  years  ago.  a  strenuous  effort  was  made  to  have  the 
Sherman  law  amended,  and  the  proposition  was  (as  many  manu- 
facturers view  it)  to  "jump  out  of  the  frying  pan  into  the  fire." 
The  "distinguished"  Samuel  Gompers  was  selected  to  preside  over 
the  convention  called  to  consider  the  question,  and  he  became  the 
leading  spirit  in  the  movement. 

His  murderous,  monopolistic  labor  machine  was  to  be  ex- 
empted from  the  criminal  provisions  of  the  law  and  was  to  be  given 
carte  blanche  in  the  use  of  the  boycott  and  other  destructive  agen- 
cies, declared  by  the  Supreme  Court  illegal  and  intolerable,  and 
which,  with  business  men,  never  would  be  tolerated,  Sherman  law 
or  no   Sherman   law.     The  effort   failed,   as   it  should,  and   as   it 


86  NATIONAL    BUSINESS    CONGRESS 


always  will  when  it  is  proposed  to  remove  any  of  the  restrictions 
now  placed  upon  organized  labor's  determined  policy  and  methods 
to  either  control  or  ruin  the  commerce  and  industries  of  this  coun- 
try. 

I  believe  that  if  a  few  sane,  level-headed  business  men  would 
take  the  matter  seriously  in  hand  with  the  avowed  purpose  of 
separating  the  wheat  from  the  chaflf,  they  could  prepare,  either  an 
amendment  to  the  present  law,  or  an  entirely  new  law,  which,  while 
prohibiting  harmful  trusts,  would  foster  the  advantages  to  be  ob- 
tained through  business  combinations  that  recognize  the  doctrine 
of  "live  and  let  live,"  and  do  it  in  such  concise  and  comprehensive 
manner  that  any  man  could  tell  when  he  is  or  is  not  violating  the 
law,  and  which  would  warrant  and  receive  the  solid  backing  of  all 
fair-minded  men. 

I  believe,  too,  that  such  a  measure,  which  might  also  embody 
a  reasonable  provision  for  governmental  supervision  over  the  capi- 
talization and  stock  and  bond  issues  of  aggregations  of  corporations 
under  one  head,  would  be  enacted  into  law  by  an  intelligent  and 
honest  Congress.  But  any  proposed  tinkering  with  the  Sherman 
law  which  would  open  the  way  for  free  and  unrestricted  use  of 
unfair  or  coercive  methods  in  dealing  with  competitors  in  business, 
or  provide  for  the  removal  of  any  barriers  to  the  baneful  methods 
of  organized  labor,  will  meet  with  sufficient  opposition  to  kill  it.  We 
are  living  in  an  age  of  organization;  an  age  when  but  little  can  be 
accomplished  except  through  organization ;  an  age  when  we  must 
cope  wath  organization ;  an  age  when  organization  alone  can  pre- 
serve your  industrial  freedom  and  mine. 

And  the  sooner  all  business  men,  including  farming  interests, 
learn  the  lesson  that  the  preservation  of  their  industrial  and  com- 
mercial rights  are  dependent  upon  organization,  the  sooner  will 
those  rights,  which  are  now  hanging  in  the  balance,  be  assured. 

But  all  abuses  incident  to  the  power  of  organization  should 
and  must  be  guarded  by  the  strong  arm  of  the  law. 

Furthermore,  the  present  vigorous  attacks  upon  business  cor- 
porations and  business  men,  while  the  federal  government  refuses, 
point  blank,  to  prosecute  the  labor  trust,  is,  in  my  opinion,  a  dis- 
grace to  our  political  system,  and  a  blot  upon  American  jurispru- 
dence. 


NATIONAL     BUSINESS     CONGRESS 87 

THE   THORN   IN    OUR   FLESH. 

I  now  wish  to  call  your  attention  to  a  form  of  organization,  the 
abuses  of  which  so  far  exceed  all  other  industrial  abuses  as  to 
make  them  appear  infinitesimal  and  of  little  consequence  in  com- 
parison. I  refer  to  the  American  Federation  of  Labor,  and  its  con- 
stituent unions.  The  purpose  of  this  outfit  is  to  have  the  workers 
control  the  employers'  business  in  matters  pertaining  to  the  man- 
agement of  employes ;  to  dictate  who  may  or  may  not  be  employed. 
The  conditions  under  which  labor  shall  be  employed;  the  amount 
of  work  a  man  shall  perform  for  the  wages  he  receives;  the  num- 
ber of  hours  he  may  work,  or  pretend  to  work;  the  number  of  our 
American  boys  that  shall  be  permitted  to  learn  trades  and  thus  be- 
come useful  and  industrious  citizens,  and  the  number  that  shall  be 
turned  adrift  to  become  vagabonds  or  tramps,  or  whatever  fate  may 
have  in  store  for  them ;  to  constitute  itself  a  trust  for  the  absolute 
monopoly  of  the  labor  market,  whereby  it  may  grant  or  withhold, 
at  its  pleasure,  privileges,  the  power  to  grant  which  rests  alone  in 
the  state  and  nation.  It  does  not,  however,  propose  to  assume  the 
responsibility  of  providing  for  the  payroll,  nor  for  the  furnishing  of 
brains  or  the  genius  requisite  for  conducting  a  successful  business. 
These  matters  it  very  graciously  proposes  to  leave  to  the  owners  of 
the  business. 


A   TERRIBLE    RECORD. 

The  record  of  this  organization  and  the  acts  and  utterances  of 
its  officers,  leave  not  the  shadow  of  a  doubt  that  its  policy  is  to  em- 
ploy any  means,  no  matter  how  brutal,  unlawful  or  unreasonable, 
that  will  tend  to  promote  an  industrial  condition  in  this  country 
in  which  the  employing  classes  shall  be  absolutely  at  the  mercy  and 
dictation  of  the  gigantic  and  merciless  labor  trust,  which,  as  I  have 
said  on  other  occasions,  proposes  to  say  to  the  farmer  that  he  shall 
either  harvest  his  crops  under  its  rules,  or  permit  them  to  perish; 
to  the  manufacturer,  that  he  shall  neither  produce  nor  transport 
contrary  to  its  will ;  to  the  merchant,  that  he  shall  neither  buy  nor 
sell,  unless  his  wares  bear  the  brand  of  its  approval ;  to  the  laborer, 
that  he  must  wear  its  yoke  or  starve;  and  to  those  who  belong  to 
none  of- these  classes,  that  they  must  suffer  tlie  wrongs,  submit  to 
the  losses  and  pay  the  penalties  to  which  its  rules  subject  them. 


88  NATIONAL     BUSINESS     CONGRESS 

A    FAIR    EXAMPLE. 

It  is  needless  for  me  to  take  up  }our  time  in  discussing  the 
relation  of  the  abuses  of  such  an  organization  to  our  foreign  and 
domestic  trade ;  the  effect  is  apparent  on  its  face ;  but  I  will  cite  one 
instance  of  the  result  of  the  domination  of  this  octopus  which  will 
suffice  for  all. 

"The  Review  says  that  in  1904,  San  Francisco  had  4.500  fac- 
tories with  $239,000,000.00  of  capital  invested  in  industrial  estab- 
lishments, and  44.875  employes.  In  1910,  she  had  1,398  factories, 
with  $79,000,000.00  of  capital  invested,  and  14,000  employes,  a  loss 
of  more  than  two-thirds  of  her  industrial  strength." 

In  comparison  with  this  extraordinary  result,  look  at  the  won- 
derful growth  of  Los  Angeles  in  population  and  in  industrial  pur- 
suits during  the  same  period,  and  then,  if  you  please,  give  due  credit 
to  General  Otis,  the  one  man  above  all  others,  who  stood  like  a  rock, 
and  fought  like  the  hero  he  is,  for  freedom  in  industry,  and  to 
whom  this  country  owes  a  debt  of  gratitude  it  can  never  repay. 

A    SOLEMN    WARNING. 

To  the  citizens  of  this  country,  especially  to  politicians;  the  Na- 
tional Civic  Federation ;  the  General  Assembly  of  the  Presbyterian 
Church,  which  is  responsible  for  the  words  and  acts  of  Rev.  Charles 
Stelzle,  and  officials  of  churches  and  educational  institutions,  I  say 
to  you  all,  and  I  say  it  knowingly  and  with  deliberation : 

Be  not  longer  deceived  by  shams  and  cunningly  devised  hypo- 
critical statements,  for  the  institution  of  which  I  am  speaking  has 
proven  itself  to  be  a  cold,  merciless  and  murderous  organization, 
having  not  the  slightest  regard  for  the  flag  of  our  country,  which 
Gompers  trampled  upon  at  San  Francisco  recently,  while  haranguing 
a  crowd  of  his  followers,  nor  caring  in  the  slightest  degree  about  the 
brotherly  love  and  uplift  of  humanity  that  its  officials  talk  so  much 
about. 

David  M.  Parry  told  you  this  in  1903.  at  New  Orleans,  and  I 
am  repeating  it  now.  Gompers  told  you  the  same  thing  when  he 
said,  "Go  to  hell  with  your  injunctions." 

It  is  to  be  hoped  that  the  McNamara  confession,  and  the  facts 
which  will  be  developed  by  the  Department  of  Justice  through  Fed- 
eral grand  juries,  will  not  only  result  in  the  arrest  and  punishment 
of  organized  labor  leaders,  organized  bands  of  murderers,  but  that 


NATIONAL     BUSINESS     CONGRESS  89 


it  will  intluence  you  and  every  patriot  and  Christian  to  such  a  deter- 
mined opposition  and  relentless  condemnation  of  existing  evils,  that 
law-defying  unionism,  socialism  and  anarchy,  will  meet  with  such 
signal  and  overwhelming  defeat  as  to  establish  the  fact  that  "This 
government  of  the  people,  by  the  people  and  for  the  people  shall 
not  perish  from  the  earth." 

THEY   NOW   SHOUT,   "HANG   THEM." 

For  once,  yes,  and  for  the  first  time  in  the  history  of  the  ac- 
cursed thing,  we  hear  them  shouting,  as  unto  Heaven,  "Hang  them, 
Hang  them!"  Men  who  are  as  guilty  as  the  McXamaras  them- 
selves, are  shouting  the  loudest.  Why?  Is  it  because  that,  as  law- 
abiding  citizens,  they  conscientiously  feel  that  justice  should  have 
its  reward?  No,  no.  It  is  because  they  have  confessed.  And 
why  did  they  plead  guilty?  It  was  because,  first,  the  noose  had 
been  drawn  tighter  and  tighter  until  every  avenue  of  escape,  except 
through  a  bought  jury,  seemed  impossible;  and,  second,  because 
the  man  who  was  retained  as  the  one  man  who  could  clear  them 
whether  guilty  or  innocent,  met  his  match  in  Prosecutor  Fredericks, 
who  in  several  instances,  had  locked  in  his  own  safe  bribe  money 
which,  it  is  said,  passed  through  that  man's  hands  or  was  paid  by 
his  orders ;  and  not  only  did  the  prosecutor  have  the  money,  but  he 
had  the  confessions  of  the  parties  who  received  it.  How  the  heart 
of  counsel  for  the  defense  began  to  melt  in  sympathy  for  the  lives 
of  their  clients  as  soon  as  they  realized  that  Mr.  Fredericks  was  on 
to  every  crooked  move  that  was  made,  and  that  the  bribe  money 
was  locked  up  in  the  prosecutor's  own  safe !  Do  you  wonder  why 
they  changed  their  pleas? 

HAVE   MY   CRITICS   CHANGED  THEIR  MINDS? 

I  have  repeatedly  stated  publicly  that  the  type  of  unionism  rep- 
resented by  the  American  Federation  of  Labor,  and  advocated  by 
Gompers  and  Mitchell  is  as  great,  if  not  a  greater  menace  to  society 
than  was  the  Ku  Klux  Klan,  the  Molly  McGuires,  the  Mafias  and 
the  Black  Hand  societies,  and  I  have  many  times  been  called  rabid 
and  radical  for  saying  so.  by  men  who  ought  to  have  had  more 
sense,  because  I  told  the  naked  truth  without  slobber  or  whitewash. 
And  now  every  newspaper  in  the  country  is  saying  the  same  and 
more.     T  wonder  if  my  critics  have  changed  their  minds. 


90  NATIONAL    BUSINESS    CONGRESS 


"I  AM  ASTOUNDED!" 

When  Gompers,  upon  being  advised  of  the  confessions  of  the 
McNamaras,  said:  "I  am  astounded!  I  am  astounded!"  I  believe 
he  spoke  the  truth,  but  when  he  said  that  his  "credulity  had  been 
grossly  imposed  upon,"  I  believe  he  lied,  and  so  does  everybody 
who  possesses  an  ounce  of  common  sense.  He  was  astounded  at 
the  confession  of  the  McNamaras,  but  not  at  their  guilt.  When 
McManigal  confessed,  Gompers  branded  him  as  a  fakir,  and  said 
he  was  a  tool  of  Burns  who,  in  turn,  w^as  the  hireling  of  a  great 
capitalistic  conspiracy  to  destroy  organized  labor;  that  he  knew  the 
whole  story  to  be  a  "frame-up"  and  that  the  McNamara  brothers 
were  absolutely  innocent;  that  a  guiltless  man  had  been  kidnapped, 
and  much  other  tommyrot,  and  he  has  steadfastly  maintained  that 
attitude  until  all  of  a  sudden  he  was  "astounded." 

Now,  who  for  one  moment  believes  that  a  man  of  Sam  Gom- 
pers' cunning,  with  McManigal's  confession  made  public,  with  the 
same  and  greater  opportunity  than  other  people  had  to  know  the 
facts,  and  with  full  knowledge  of  the  100  or  more  cases  of  dyna- 
mited non-union  bridges  and  other  structures,  with  the  repeated 
cases  of  murder  and  slugging  of  non-union  men  going  on  con- 
stantly and  everywhere  in  labor  disputes,  could  be  so  simple-minded 
and  so  gullible  as  to  feel  as  positively  as  he  has  pretended  to  have 
felt,  that  those  men  were  the  innocent  victims  of  a  conspiracy  to 
injure  organized  labor?  Really,  is  not  the  proposition  so  absolutely 
ridiculous  as  to  make  the  man  "look  like  thirty  cents?" 


THE  "SAINTLY   MITCHELL." 

Now,  men,  there  is  no  sense  in  trifling  with  this  question  any 
longer.  It  has  been  nursed  and  coddled  too  long,  and  we  know 
the  result. 

The  "Saintly"  John  Mitchell  has  just  finished  the  publication 
of  a  series  of  twelve  weekly  articles  on  the  various  phases  of  trades 
unionism  of  the  kind  for  which  he  stands  sponsor.  I  doubt  if  very 
many  people  have  read  them,  but  I  have  read  them  to  see  what  he 
would  say  about  the  thousands  upon  thousands  of  cases  of  murder, 
slugging,  intimidation,  coercion  and  violence  perpetrated  by  mem- 
bers of  his  pet  organization,  under  the  sanction  and  direction  of 


NATIONAL    BUSINESS     CONGRESS  91 


its  officers,  and  for  which  many  of  them  have  been  fined  or  sent  to 
prison.  I  have  looked  for  some  reference  to  some  case  where  he 
and  Gompers  had  voiced  their  protest  against  such  practices,  and 
where  they  had  inaugurated  some  move  to  put  an  end  to  them.  I 
have  looked  for  some  reference  to  the  damnable  conspiracy  that 
was  on  trial  at  Los  Angeles.  But,  if  anything  of  the  kind  worthy 
of  mention,  which  is  not  couched  in  smooth  and  oily  apologetic  lan- 
guage, is  to  be  found  in  any  of  those  articles,  it  has  escaped  my 
notice.  They  are  made  up  of  platitudes,  sophistry  and  sop,  cun- 
ningly designed  to  hoodwink  the  unwary  reader,  just  as  all  of  his 
utterances  have  been  studiously  calculated  to  deceive  and  mislead. 
The  last  of  these  articles  was  published  Sunday,  December  10th,  ten 
days  after  the  AlcXamaras  pleaded  guilty,  and  yet  John  Mitchell 
ignored  the  incident  and  said  not  a  single  word  in  condemnation  of 
the  crimes  committed  in  the  name  of  the  organization  he  attempts 
to  defend.  Practically  the  whole  of  his  twelfth  article  is  devoted 
to  deriding  my  utterances  against  the  abuses  of  organized  labor. 

The  little  incident  at  Los  Angeles  was  apparently  not  of  suffi- 
cient importance  to  receive  recognition  at  his  hand  at  the  price  per 
line  he  was  paid  for  writing  it.  I  will  not  take  up  your  time  nor 
waste  mine  in  further  answering  John  Mitchell.  The  McNamara 
brothers  have  justified  fully  every  criticism  I  have  ever  made  of 
John  Mitchell  and  his  organization.  Permit  me,  however,  to  quote 
one  paragraph  from  a  remarkable  editorial  which  appeared  in  the 
New  York  Sun,  December  6,  1911,  and  which  every  man  in  this 
country  should  read.  The  editorial  refers  to  the  conspicuous  moral 
heroism  of  a  few  men  as  follows : 

"Loewe.  who  defied  the  whole  Federation  and  stated  that  he 
would  go  back  to  the  bench  as  a  journeyman  hat  maker  before  he 
closed  his  shop  to  any  non-union  worker ;  Van  Cleave,  who  saw  the 
great  business  which  his  industrial  enterprise  had  built  up  slowly 
disintegrating,  and  yet  fought  on  until  death — possibly  hastened  by 
acute  anxiety — ended  his  trouble;  Davenport,  a  type  of  the  best 
lawyer  who  developed  the  testimony  upon  which  the  victories  for 
law  in  the  Danbury  hatters'  case  and  the  Buck  stove  case  were 
largely  won;  Burns,  who  taking  his  life  in  his  hands,  as  did  Mc- 
Parlan  in  the  days  of  the  Molly  McGuires,  never  ceased  his  investi- 
gation until  he  had  woven  the  net  about  the  dynamiters  so  strongly 
that  no  cunning  could  break  through  it." 


92  NATIONAL     BUSINESS     CONGRESS 

THE    FIRST    PROTEST. 

Not  until  the  JMcNamaras  confessed  and  laid  bare  to  the  world 
the  horrible  truth,  was  there  ever  a  protest  uttered  against  such 
things  by  the  militant  labor  unions  or  their  officers.  But  when  that 
terrible  shock  came  there  went  up  a  loud  cry  against  violence  and  a 
demand  that  the  McNamaras  be  hanged.  Of  course,  this  was  done 
as  a  last  hope  to  save  the  life  of  the  organization  in  whose  behalf 
the  McNamaras  perpetrated  the  heinous  crimes  for  which  they  have 
been  sentenced.  Let  it  be  remembered  that  the  whole  bunch  stood 
solidly  behind  the  whole  gang  of  murderers  right  up  to  the  moment 
of  the  final  and  positive  exposure. 

"HUSH!  DON'T  SPEAK  SO   PLAIN." 

Men,  hear  me !  I  tell  you  candidly,  fearlessly  and  as  seriously 
as  I  know  how.  what  I  have  for  years  been  telling  the  people  of 
this  country,  and  what  many  well-meaning  men  have  censured  me 
for  telling  in  plain  language,  and  that  is  that  every  law-abiding, 
self-respecting,  thinking  man  in  this  country,  whatever  he  may  be, 
a  day  laborer  or  a  bank  president,  or  whatever  be  his  calling,  should 
turn  his  face  like  adamant  against  any  organized  system  that  makes 
possible  a  condition  such  as  has  been  exposed  at  Los  Angeles. 

There  is  no  use  to  mince  matters  nor  to  blind  your  eyes  to  a 
thing  that  stands  out  as  bold  as  the  shining  sun.  Now,  is, there  any 
sense  in  permitting  such  men  as  John  Mitchell  to  throw  sand  in 
your  eyes  ?  I  have  no  patience  with  men  who  say,  "Hush !  Don't 
speak  so  plain."  It  is  that  sort  of  mollycoddle  nonsense  that  has 
helped  to  advance  the  curse  to  where  it  is,  and  I  say  to  you  that  it 
is  the  plain  bounden  duty  of  every  decent  citizen  to  help  wipe  the 
thing  from  the  face  of  the  earth.  The  coward  who  shirks  that 
duty  is  but  little  if  any  more  worthy  of  the  respect  of  his  fellow- 
citizens  than  are  the  men  who  constitute  a  part  of  the  conspiracy 
itself. 

If  labor  cannot  organize  and  behave  with  decency  and  justice, 
then,  in  God's  name,  I  say  it  has  no  business  to  be  organized,  and 
the  rest  of  the  people  should  see  to  it  that  it  is  not.  In  speaking  of 
business  interests,  it  has  been  altogether  too  common  to  omit  the 
farming  interests,  and  it  is  time  now  to  include  them. 

The  farmer  is  as  much  a  business  man  as  the  manufacturer  or 
merchant,  and  by  recognizing  this  fact  and  all  working  together  in 


NATIONAL     BUSINESS     CONGRESS 93 

a  common  cause  we  shall  yet  be  able  to  save  this  country  from  the 
throes  of  dynamite  and  coercive  unionism  and  to  restore  to  every 
American  workman  a  free  passage  to  and  from  his  labors.  (Con- 
tinued applause.) 

The  Chairman  :  Gentlemen,  as  the  hour  for  adjournment  is 
getting  near  and  there  is  still  another  address  to  be  made  before  this 
session  is  over,  in  this  debate  we  will  have  to  limit  the  speaking  to, 
I  think,  about  five  minutes  for  each  speaker  in  order  to  get  through. 
The  subject  is  now  open  for  debate. 

If  there  is  no  debate  we  wall  hear  the  address  of  Mr.  Frederick 
Townsend  Martin,  of  Xew  York,  on  "Compulsory  Insurance." 
(Applause.) 


COMPULSORY    INSURANCE. 


By  Frederick  Tow^nsend  Martin. 


Mr.  Chairman  and  Gentlemen : 

I  thank  you  with  all  my  heart  for  this  opportunity  of  address- 
ing you  on  a  subject  which  seems  to  me  of  the  greatest  importance, 
not  only  to  the  business  and  work-a-day  world,  but  to  the  entire 
Nation. 

In  the  name  of  progress,  economy,  justice  and  humanity  I  stand 
here  to  urge  you  to  take  measures  that  shall  result  in  legislation  for 
Compulsor}^  Insurance. 

PROGRESS.  . 

During  the  past  century  great  labor-saving  inventions,  the  ap- 
plication of  steam  and  electricity  to  machinery  have  completely 
transformed  the  industrial  world. 

Laws,  customs  and  methods  adapted  to  the  old  order  of  things 
have  proved  entirely  unsuited  to  the  new.  The  immense  progress 
made  in  the  arts  and  sciences  have  found  no  counterpart  in  the  laws 
and  customis  which  that  progress  demanded. 

We  often  discard  machinery  that  is  five  or  ten  years  old,  for 
something  better,  but  we  are  content  to  live  under  law's  and  practices 
which  have  remained  almost  unchanged  for  three  centuries,  and 
which  have  little  to  commend  them  except  their  antiquity. 


94  NATIONAL     BUSINESS     CONGRESS 

In  the  world  of  mechanics,  of  manufactures,  of  physical  science 
and  of  commerce  the  inventive  mind  is  constantly  on  the  alert  to  dis- 
cover better,  simpler,  more  economical  or  more  efifective  methods, 
while  the  legislator  boasts  of  treading  the  highways  of  antiquity, 
as  if  there  were  no  unexplored  regions  in  the  field  of  social  or  polit- 
ical science,  no  discoveries  to  be  made,  no  reforms  to  be  achieved. 
The  premise  from  which  I  proceed  may  be  summed  up  by  the 
maxim  "Every  man  is  entitled  to  a  living." 

If  a  man's  life  is  sacred,  if  he  is  not  to  be  stricken  down  by  the 
assassin,  so  his  right  to  a  living  shall  be  guarded.  He  shall  not  be 
allowed  to  starve.  The  right  to  life  and  the  right  to  a  living  are 
not  to  be  distinguished. 

To  quote  Ecclesiasticus :  "He  that  taketh  away  his  neighbor's 
living,  slayeth  him."  And  "He  that  defraudeth  the  laborer  of  his 
hire,  is  a  blood-shedder."  The  great  Montesquieu  maintained  that 
the  State  owes  to  all  of  its  citizens  an  assured  subsistence  and  a 
mode  of  life  consistent  with  health. 

To  Carlyle  it  seemed  a  platitude  of  a  world  in  which  all  work- 
ing horses  could  be  well  fed  and  innumerable  workingmen  should 
die  starved.  A  civilized  nation  must,  necessarily,  act  upon  the 
principle  that  no  person  within  its  limits  shall  perish  for  lack  of 
food,  clothing  or  shelter. 

Therefore,  it  must  decide  in  substance  that  the  product  of  labor 
of  a  given  generation  must  support  all  during  that  generation ;  but 
while  the  industries  of  a  community  ought  to  support  the  great  body 
of  workmen,  every  industry  ought  to  support  those  workers  who 
devote  themselves  to  it.  If  a  given  industry  does  not  pay  the  neces- 
sary living  wage,  it  is  not  a  self-supporting  industry.  It  is  in  a 
measure  parasitic. 

EMPLOYERS. 
If  all  employers  were  a  unit  and  if  this  unit  were  intelligent, 
however  merciless  it  might  be,  confronted  with  the  problem  of 
procuring  labor  merely  upon  hard  business  principles,  keeping  in 
mind  both  cost  and  efficiency,  seeking  the  lowest  cost  consistent 
with  high  efficiency,  it  would  consider  how  much  it  would  cost  to 
rear  the  human  being  or  the  class  of  human  beings  best  fitted  for 
its  purpose.  It  would  consider  how  long  a  period  of  infancy  must 
precede  his  capacity  to  work  and  what  loss  from  death  would  occur 
during  that  period.  How  long  the  natural  term  of  labor  may  be 
and  how  much  diminished  by  premature  death. 


NATIONAL     BUSINESS     CONGRESS  95 

What  allowance  must  be  made  for  incapacity  resulting  from 
accidents,  from  sickness,  from  invalidity  of  any  sort.  How  long  a 
period  of  dependence  there  would  be  after  working  days  were  over. 
It  would  find  that,  for  the  best  results,  this  workingman  and  his 
family  must  be  well  clothed,  well  housed,  well  fed,  and  he  must 
live  and  work  under  proper  hygienic  conditions. 

He  must  have  hospitals,  medical  and  surgical  attendance  in  ill- 
ness and  after  accidents ;  it  would  even  find  that  to  a  certain  extent 
he  must  be  educated  and  have  mental  and  moral  training.  Having 
determined  this  cost,  it  would  pay  that  and  nothing  more.  In  other 
words,  it  would  act  as  intelligently,  not  to  say  humanely,  in  rearing 
a  workman  destined  for  efficient  labor,  as  it  now  does  in  rearing  a 
beast  of  burden. 

EMPLOYES. 

On  the  other  hand,  labor  acting  with  similar  intelligence  and 
singleness  of  purpose  and  making  similar  allowances  for  waste, 
could  and  should  demand  nothing  less  than  the  cost  of  living  for 
the  whole  period  of  life. 

WHAT  BOTH   EMPLOYER  AND  EMPLOYE   IGNORE. 

It  practically  happens,  as  though  through  some  inadvertence, 
that  in  making  a  contract  of  the  greatest  possible  moment,  both 
parties  seem  to  ignore  absolutely  certain  very  important  elements. 

The  contract  is  made  as  though  sickness,  accidents,  invalidity 
and  old  age  had  been  permanently  banished  from  the  earth.  The 
daily  wage  is  sufficient  only  for  daily  necessities.  A  man  entitled 
to  support  for  a  lifetime  unwittingly  consents  to  a  wage  based  upon 
a  portion  of  that  lifetime. 

The  disparity  between  the  wage  paid  during  the  period  of 
earning  capacity  and  the  wage  sufficient  for  the  workman's  sup- 
port throughout  his  life  is  most  striking  in  dangerous  and  unhealthy 
employments. 

If  the  industry,  paying  what  is  a  living  wage  for  the  moment, 
merely  exhausts  its  victim  in  twenty  years  or  less,  as  is  frequently 
the  case,  it  has  drunk  the  wine  of  the  wage-earner's  life  and  left 
to  him,  or  to  society,  the  dregs. 

It  has  often  wastefully  used  up  this  human  material  and 
thrown  the  wreck  aside  as  remorselessly  as  though  it  were  inani- 
mate machinery. 


96  NATIONAL     BUSINESS     CONGRESS 


This  subject  has  usually  been  discussed  as  though  it  concerned 
individuals  or  classes,  the  employer  and  the  workman.  That  might 
be  a  safe  policy  if  the  parties  to  a  labor  contract  met  on  equal 
terms,  but  we  cannot  ignore  the  fact  that  there  is  no  industrial 
equality  between  them. 

The  rate  of  wages  is  such  as  to  bring  the  scale  of  living  very 
near  to  what  is  vaguely  termed  the  point  of  subsistence. 

IN   AMERICA. 

We  are  apt  to  think  of  the  laboring  classes  in  this  country  as 
well  fed,  well  clothed  and  well  housed  and  not  proper  objects  of 
solicitude.  We  are  incredulous  when  told  that  Germany's  poorer 
classes,  though  less  favored  by  circumstances,  maintain  a  higher 
level  of  well-being  and  a  far  higher  level  of  vitality  than  those  of 
either  the  United  States  or  England.  Yes !  It  is  true  that  we  know 
less  about  the  poverty  of  our  people  than  almost  any  other  nation 
of  the  Western  w^orld.  Americans  work  themselves  out  at  an 
earlier  age  and  are  more  subject  to  fluctuations  of  employment  than 
European  workmen  and  industrial  accidents  are  much  more  frequent. 

There  could  undoubtedly  be  found  in  many  manufacturing 
towns,  both  in  England  and  America,  families  who  have  not  once 
caught  a  glimpse  of  prosperity  in  four  generations,  nor  once  been 
separated  from  actual  want  by  an  interval  of  say,  thirty  days.  For 
such  workmen,  poverty  is  not  mere  destitution.  There  goes  with 
it  apprehension  as  to  the  future.  There  goes  w^th  poverty,  too,  the 
consciousness  of  the  loss  of  dignity  and  manhood;  the  knowledge 
that  there  is  left  no  capacity  to  make  the  contract  for  labor  on  equal 
terms. 

CAUSE    OF    POVERTY. 

There  is  a  feeling  too  general  that  poverty  and  pauperism  are 
the  results  mainly  of  intemperance  and  of  improvidence,  and  we 
sometimes  think  that  we  see  in  them  a  sort  of  retributive  justice. 
Statistics,  both  in  England  and  America,  indicate  most  decidedly 
that  only  a  small  part  of  existing  pauperism  is  traceable  to  intem- 
perance, while  most  is  attributable  to  misfortune. 

I  have  in  mind  the  figures  compiled  by  Charles  Booth  for  the 
London  Statistical  Society ;  and  Warner,  for  American-  Charities. 
It  Avould  seem  reasonable  to  expect  certain  indiscreet  consequences 
of  a  defective  wage  system. 


NATIONAL     BUSINESS     CONGRESS  97 


\\'itliout  going  into  the  matter  in  detail,  it  is  material  to  note  the 
extent  of  poverty  among  workmen  in  its  various  forms.  Time  does 
not  permit  me  to  give  definite  hgures;  nor  is  it  necessary  for  our 
purpose,  hut  the  investigations  of  many  competent  observers  lead  to 
the  conclusion  that  more  than  one-half  of  the  families  of  the  country 
and  nine-tenths  of  those  in  the  cities  and  industrial  communities  are 
property-less. 

In  a  group  of  states,  including  Massachusetts,  one-fifth  are  in 
poverty,  so  says  Professor  Richard  T.  Ely,  in  the  North  American 
Review. 

PROSPERITY. 

Too  frequently  the  dazzling  splendor  of  great  wealth  blinds 
our  eyes  to  the  real  significance  of  the  signs  of  the  times,  and  we 
think  we  see  evidences  of  great  National  prosperity  in  the  very 
phenomena  which  really  indicate  Social  injustice  —  a  condition 
where  the  man  who  toils  is  invited  to  bask  in  the  reflected  warmth 
and  light  of  another's  prosperity. 

PAUPERISM. 

There  are  property-less  living  in  some  degree  of  comfort,  but 
each  month's  earning  supplies  but  a  month's  necessities.  The  vic- 
tims of  poverty  who  constantly  feel  the  bitterness  and  sting  of  w^ant 
• — paupers  clinging  like  parasites  to  society. 

Their  transition  downward  is  easy.  The  property-less  are  on 
the  verge  of  poverty.  Those  in  poverty  are  on  the  verge  of  pauper- 
ism, and  from  the  lowest  stage  of  pauperism  there  seems  to  be  no 
return. 

A  pauper  is  the  victim  of  poverty  who  surrenders.  The  capitu- 
lation is  abject,  absolute  and  unconditional.  Having  acquired  the 
hated  badge,  he  is  content  to  wear  it  for  life  and  bequeath  it  to  his 
children. 

PROBLEM  MUST  BE  SOLVED. 

Society  has  here  a  problem  of  great  importance.  It  must  solve 
it  with  reference  to  all  of  its  phases— social,  economic,  industrial 
and  ethical. 

We  live  in  a  progressive  age.  The  initiation  of  social  experi- 
ments ;  the  triumphs  of  social  legislation  are  proclaimed  to  the  whole 
world;  these  problems  are  virtually  the  same,  whether  under  a 
democracy  or  under  a  monarchy ;  everywhere  poverty  is  squalid  and 


98  NATIONAL     BUSINESS     CONGRESS 

debasing.  Everywhere  riches  are  sordid  and  debasing.  Every- 
where the  relations  of  capital  and  labor  are  similar,  and  there 
is  a  similar  social  disquietude  over  real  or  fancied  griev- 
ances; everywhere  there  is  the  same  gulf  between  luxury  and 
penury ;  the  same  resentment  towards  the  arrogance  and  pretensions 
of  privilege  and  power. 

THE   DEMOCRACY  TO   BE. 

Nor  can  we  intelligently  hope  that  in  some  mysterious  way 
Democracy  will  tend  automatically  to  cure  industrial  evils  or  to 
solve  industrial  problems.  Rather  should  we  bear  in  mind  that 
from  the  industrial  point  of  view,  Democracy  has  not  yet  been 
achieved. 

Men  are  frequently  under  the  domination  of  industrial  condi- 
tions which  inexorably  override  statutes,  Constitutions  and  Bills  of 
Rights.  Unless  the  workman  can  negotiate  on  equal  terms  for  his 
labor — the  only  commodity  which  he  ever  has  to  offer  in  the  world's 
market — unless  there  is  contractual  equality,  mere  political  equality 
may  be  and  is  a  mockery  and  a  delusion. 

His  political  rights  may  even  be  surrendered,  as  a  part  of  the 
consideration  in  the  contract  for  labor.  But,  through  sane  social 
legislation,  based  upon  principles  of  equity  and  equality,  v.e  may 
gradually  advance  towards  real  Democracy. 

COMPULSORY  INSURANCE  DEMOCRATIC. 

My  claim  for  Compulsory  Insurance  is  that  it  is  democratic 
because : 

It  will  secure  a  greater  degree  of  contractual  equality  between 
employer  and  employe  than  is  now  possible. 

As  to  the  form  which  compulsory  insurance  is  to  take,  that 
must  be  determined  by  those  more  expert  than  I  am  in  matters  of 
legislation,  but  I  care  not  what  form  it  takes,  unless  it  is  compulsory 
upon  all,  employers  and  employes,  it  will  be  ineffective  and  un- 
democratic. 

THE    AWAKENING. 

The  people  are  beginning  to  take  an  interest  in  this  subject. 
A  few  years  ago  all  suggestions  were  hushed  by  the  sneering  epithets 
"Socialism,"  "Sentimentalism,"  "Paternalism,"  and  the  hint  that 
one  was  corrupted  by  German  "Absolutism." 


NATIONAL     BUSINESS     CONGRESS  99 


Of  course,  there  never  was  any  real  weight  in  such  empty  and 
provincial  phrases;  and  they  merely  indicated  the  fact  that  the 
American  mind  was  empty  of  knowledge  of  a  world  movement. 

They  revealed  an  indifference  to  human  suffering  which  did  no 
credit  to  our  civilization;  and  a  contempt  for  social  science,  not 
honorahle  to  our  politicians,  editors  and  lawyers. 

European  nations  have  solved  this  problem,  at  least  to  some 
extent,  while  America,  proud  of  its  inventiveness  and  initiative, 
lags  in  the  rear  and  rails  at  the  "Effete"  Monarchies  of  the  Old 
World  and  foretells  all  sorts  of  evils  like  those  senile  persons  who 
praise  the  times  that  are  dead. 

The  time  has  come  for  an  awakening.  Look  at  the  enormous 
cost  of  litigation,  a  burden  upon  the  resources  of  the  nation,  and  a 
disgrace  to  the  legal  profession,  as  well  as  a  source  of  corruption. 

Studies  of  the  causes  of  wasteful  expenditure  in  courts  reveal 
the  slow  and  serpentine  course  of  personal  damage  suits,  which  fill 
the  dockets  and  blockade  the  roads  of  Justice. 

Important  commercial  business  must  wait  while,  during  long 
years,  some  mutilated  workman,  led  by  an  ambulance  chasing  lawyer 
who  is  fed  on  hopes  of  immense  contingent  fees,  fights  his  employer 
or  a  soulless  Casualty  Insurance  Company  through  court  after  court, 
in  the  end  to  accept  the  pittance  which  the  attorneys  are  willing  to 
leave  him  from  the  award. 

JUSTICE,    IDEAL   AND    REAL. 

The  ideal  of  Justice  is  prompt,  certain,  and  unbought  in- 
demnity. The  actual  fact  is  that  under  our  Employers'  Liability 
Law  the  indemnity  for  injury  in  occupation  is  subject  to  all  the 
uncertainties  of  gambling. 

It  comes,  if  ever,  after  long  and  painful  waiting,  and  it  is 
robbed  of  its  value  by  the  necessary  costs  of  collection  through  the 
Courts. 

There  is  no  greater  source  of  hatred  for  law  and  judicial 
process  than  this  travesty  and  mockery  of  Justice. 

The  abuses  of  injunctions  in  cases  of  strikes  and  boycotts  are 
comparatively  rare,  and  easily  remedied,  but  the  wrongs  legally  per- 
petrated in  damage  suits  are  a  matter  of  universal  and  daily  ex- 
perience. 

As  soon  as  a  workman  is  injured,  and  claims  his  indemnity  in 
courts,  his  employer  may  put  him  on  a  black  list  and  persecute  him 


100  NATIONAL     BUSINESS     CONGRESS 

to  death,  and  the  very  nature  of  the  law  produces  this  artificial  and 
monstrous  antagonism. 

Lawlessness  and  class  hatred  are  the  legitimate  progeny  of  a 
procedure  which  ought  to  be  rejected  by  every  great  and  civilized 
people,  as  it  has  been  by  Germany. 

Why  follow  precedent  of  the  past  for  a  guide  in  a  new  and 
different  economic  world?  What  we  need  is  insurance  of  income  in 
all  cases  of  accident,  whether  from  negligence  of  employer,  or  from 
risk  of  the  trade. 

THE  POWER  OF  ASSOCIATION. 

lly  a  reflex  movement,  perhaps  of  discomfort  rather  than  from 
scientific  guidance,  employers  and  employes  are  performing  all 
sorts  of  experiments  with  Insurance. 

Blind  and  faulty  as  those  gropings  are,  they  must  be  made  the 
starting  point  for  a  scientific  and  complete  system  in  the  future,  as 
acorns  produce  oaks. 

The  principle  cf  association  for  mutual  protection  in  the  emer- 
gencies of  existence  manifests  itself  in  the  Clubs  and  local  Benefit 
Societies  which  are  formed  everywhere  in  the  country. 

Fraternal  Societies  of  National  scope  and  local  lodges,  all  fede- 
rated in  the  common  interest,  have  with  slow  and  irregular  march 
educated  millions  of  people  in  the  elementary  principles  of  social 
insurance. 

They  have  demonstrated  the  possibilities  of  economy  of  ad- 
ministration. The  Mutualists  of  France  have  shown  that  not  only 
sickness  insurance  and  death  benefits,  but  also  Old  Age  Pensions 
can  be  provided  by  this  method,  with  proper  Governmental  aid  and 
supervision. 

Some  of  the  Trade  Unions  have  added  insurance  features  of 
various  kinds,  and  have  achieved  a  moderate  success  with  unem- 
ployment benefits,  but  they  have  failed  to  insure  the  workmen  who 
are  on  low  and  uncertain  income. 

//  a  system  of  compulsory  accident  insurance  were  organized 
and  applied  and  enforced,  Trade  Unions  would  still  be  free  to  pro- 
vide sickness  and  invalid  insurance,  hut  they  can  never  furnish  ade- 
quate Accident  Insurance. 

Society  has  no  right  to  require  them  to  carry  a  risk  which  is 
part  of  the  real  cost  of  production,  and  should  be  borne  wholly  as 
part  of  the  expenditures  of  production. 


NATIONAL    BUSINESS     CONGRESS'  101 

INSURANCE  VERSUS  SAVING. 

One  principle  has  been  taught  to  niihions  of  persons  by  all  these 
schemes  of  Insurance — the  principle  of  Insurance  as  opposed  to 
Savings. 

The  minute  a  man  joins  an  Insurance  Society,  he  gains  a  claim 
on  a  Fund  which  he  could  not  "save"  in  twenty  years. 

Furthermore,  men  are  discovering  that  co-operation  with  others 
opens  a  finer  way  of  life  than  depositing  premiums  to  an  individual 
account. 

There  is  scarcely  a  good  manufacturing  or  transportation  com- 
pany which  is  not  employing  legal  talent  to  recommend  methods  of 
insurance.  To  this  cause  they  are  driven  all  the  more  by  the  ten- 
dency of  legislators  to  lay  upon  corporations  creations  of  the  state, 
burdens  of  liability  which  they  do  not  think  of  imposing  on  private 
employers. 

The  consequence  is  that  the  directors  of  large  enterprises  are 
looking  about  for  a  method  which  will  at  once  conciliate  employes, 
and  avoid  the  waste  of  litigation  and  damage  suits. 

WE   MUST   MAKE   INSURANCE   COMPULSORY. 

No  voluntary  system  of  insurance  can  be  economically  admin- 
istered, save  upon  a  foundation  of  compulsory  insurance.  The 
reason  is  obvious,  and  all  the  schemes  in  existence  illustrate  the  law. 

So  long  as  accident  insurance  continues  to  be  optional,  many 
employers  and  employes  will  neglect  organization,  and  they  will 
hamper  or  even  defeat  those  who  are  willing  to  organize. 

Employers  feel  that  they  cannot  afford  to  support  accident  in- 
surance at  their  own  cost,  so  long  as  they  are  liable  to  pay  heavy 
damages  to  injured  workmen,  or  fight  them  in  the  court ;  and  the 
law  always  keeps  them  in  a  fighting  mood. 

So  long  as  part  of  the  employers  refuse  to  carry  these  extra 
premiums,  their  competitors  are  economically  compelled  to  follow 
their  example. 

WHAT  COMPULSORY  INSURANCE  WOULD  DO. 

A  compulsory  insurance  law  would  at  one  stroke  of  the  pen 
remove  the  burden  created  by  the  present  liability  for  negligence 
and  the  appalling  waste  in  Casualty  Company  fees  anrl  litigation. 


102  NATIONAL     BUSINESS     CONGRESS 

At  the  same  time  the  amount  now  wasted  or  misdirected  would 
be  available  for  an  accident  and  sickness  insurance  fund  of  vast 
magnitude. 

At  present  an  enormous  sum  is  spent  for  soliciting  business, 
settling  claims,  etc.  This  is  all  waste;  because  under  compulsory- 
insurance,  employers  would  seek  the  means  of  meeting  their  respon- 
sibilities. 

CONSTITUTIONALITY. 

That  which  is  economically  necessary  and  otherwise  socially 
imperative  will  ultimately  be  found  constitutional.  In  all  our  his- 
tory there  has  been  no  exception  to  this  rule,  although  at  every  step 
into  a  brighter  world,  judges  have  solemnly  denied  the  possibility, 
and  lawyers  have  turned  back  to  their  case  books  with  a  smile  of 
pity  for  the  philanthropists  or  bitter  sarcasm  for  the  agitator,  who 
ruffled  the  calm  sea  of  their  precedents. 

AMERICANISM. 

We  are  told  that  compulsory  insurance  is  un-American.  That 
assertion  is  contrary  to  the  most  obvious  facts  in  our  history.  We 
are  a  law  abiding  people,  and  love  to  make  laws.  Every  statute  and 
court  ruling  is  compulsory.  We  are  so  used  to  compulsion  in  the 
common  interest  that  we  forget  it,  as  we  are  unconscious  of  the 
atmosphere. 

It  is  the  vital  element  in  which  we  enjoy  freedom,  security, 
order  and  opportunity. 

By  compulsory  laws  we  build  and  maintain  roads  and  bridges, 
and  very  often  against  the  mean  protest  of  the  minority,  who  would 
be  content  to  stick  in  the  mud. 

By  compulsory  laws  we  secure  parks  and  pleasure  grounds,  and 
secure  a  revenue  by  diverting  money  from  the  liquor  traffic. 

Within  my  memory,  in  the  Aliddle  West,  a  large  if  not  respect- 
able minority  railed  at  the  Public  School  law  as  robbery,  and  in- 
sisted that  any  man  had  the  right  to  bring  up  his  offspring  in 
brutish  ignorance  if  he  wished  to  do  so. 

We  have  compulsory  taxation  to  relieve  the  poor,  the  insane, 
the  idiotic,  the  indigent.  This  means  that  the  conscience  of  a 
modern  nation  will  not  permit  a  human  being,  however  inefficient 
or  unworthy,  to  perish  without  an  offer  of  at  least  a  minimum 
supply  of  the  necessities  of  life. 


NATIONAL     BUSINESS     CONGRESS  103 


Where  is  the  Americanism  in  sheltering  criminals,  prostitutes, 
ignorant  ne"er-do-weels  and  degenerates,  and  denying  shelter  to 
honest  workmen,  except  on  terms  revolting  and  debasing. 

SOCIETY, 

The  popular  campaign  against  tuberculosis  has  revealed  to 
the  common  mind  the  meaning  of  the  "Police  Power"  of  the  State 
and  the  significance  of  public  health  administration. 

Xo  man  can  stick  unto  himself,  especially  in  a  crowded  fac- 
tory or  tenement  house.  Those  who  are  too  ignorant,  poor  or 
negligent  to  keep  well,  are  taken  in  hand  by  the  'Commissioner  of 
Health.  Those  who  suffer  from  infectious  diseases  are  isolated  in 
special  hospitals,  or  warning  bulletins  are  posted  at  the  front  door. 
It  is  notorious  that  people  of  small  incomes  go  to  physicians  and  dis- 
pensaries only  in  the  last  resort,  from  fear  of  expense  their  incomes 
cannot  meet. 

Society  is  discovering  that  neglect  of  disease  or  wounds  in- 
volves the  public  and  is  dangerous. 

CLASS    LEGISLATION. 

In  reply  to  those  who  declaim  against  compulsory  insurance  as 
class  legislation  I  say  emphatically  it  is  not  class  but  social  legis- 
lation, because  all  members  of  society  reap  its  advantages,  just  as 
rich  men  who  send  their  children  to  private  schools  derive  benefits 
from  the  public  schools  which  educate  the  poorer  neighbor. 

Under  compulsory  insurance  an  injured  w^orkman  places  him- 
self instantly  under  expert  medical  advice  instead  of  legal  advice, 
and  is  more  surely  and  speedily  restored  to  industrial  efficiency, 
instead  of  penury,  and  so  becomes  again  a  producer  of  social 
wealth. 

Compulsory  Insurance  is  the  best  public  health  measure  yet 
conceived  of. 

THE   PHYSICIAN. 

Has  any  one  investigated  the  cost  and  moral  degradation 
caused  by  the  non-payment  of  medical  service?  It  is  notorious 
that  physicians  annually  contribute  millions  of  dollars  to  patients 
who  'vnW  not  or  cannot  pay.  Is  not  this  a  compulsory  tax  on 
physicians? 


104  NATIONAL     BUSINESS     CONGRESS 


1  feci  certain  tliat  it  is  not  clicertul  ])liilanthropv.  Phvsicians 
cannot  refuse  the  call  of  a  wounded  or  >ick  person  and  cannot  re- 
(juire  advance  payments,  as  landlords  and  grocers  can.  Public 
opinion  and  the  ethics  of  their  ])rofession.  require  them  to  rise  in 
the  night,  and  through  storms  to  help  those  who  sulTer;  and  this 
without  hope  of  payment. 

Gentlemen.  I  submit  this  is  unscientihc  and  barbarous;  wholly 
unnecessary.  Physicians  should  have  a  social  guarantee  of  pay- 
ment. A  Compulsorx'  Insurance  law  fund  would  be  such  a  guaran- 
tee. 

How  can  we  secure  prompt  and  ec(Miomic  application  to  the 
medical  profession,  without  ])auper  relief.  The  answer  comes 
from  (lermany :  "J]y  compulsory  and  universal  sickness  insur- 
ance."    There   is   no   other   anwser. 

MALINGERING. 

The  fear  is  often  expressed  that  if  workmen  are  insured 
against  accidents,  they  will  claim  benefits  on  slight  pretexts  in  order 
to  get  a  vacation.  Experience  proves  the  contrary.  Men  instinct- 
ively avoid  pain  and  mutilation.  Benefits  never  equal  wages,  and 
if  there  be  such  an  evil,  medical  certificates  would  reduce  it ;  but 
the  evils  of  malingering  are  not  to  be  weighed  against  the  well- 
known  miseries  of  the  present  situation. 

INSURANCE  COMPANIES. 

Naturally,  insurance  companies  would  be  unwilling  to  submit  to 
changes  in  the  field  of  accident  and  health  insurance,  by  compulsory 
laws  of  the  State,  but  to  perpetuate  the  present  system  for  their 
benefit,  would  not  only  be  class  legislation,  but  a  social  crime. 

Compulsory  State  insurance  is  an  imperative  social  necessity. 
And  whatsoever  stands  in  its  way  must  be  swept  away. 

IN   CONCLUSION. 

A  compulsory  school  education  was  necessary  for  the  intellec- 
tual education  of  the  masses.  Compulsory  Insurance  is  necessary 
for  the  economic  well-being  of  the  masses.  The  fear  that  com- 
pulsory insurance  would  hinder  the  development  of  free  activities 


NATIONAL     BUSINESS     CONGRESS  105 


of  association  has  been  completely  allayed  by  the  astonishing  expe- 
rience of  Germany. 

Compulsory  insurance  is  the  inevitable  result  of  measures  al- 
ready taken  by  leading  employers.  The  greatest  managers  have 
already  entered  seriously  upon  a  policy  of  insurance  in  some  form, 
though  ever  so  inadequate  and  crude;  and  every  manager  who  as- 
sumes financial  burdens  in  this  direction  finds  his  pecuniary  interest 
threatened  by  those  less  intelligent,  progressive,  and  humane. 

Wliat  must  be  the  effect?     The  only  means  of  equalizing  the 
burden  is  by  legislation  compelling  all  employers  to  bear  the  same 
load;  and  preventing  the  meanest  and  most  narrow-minded  from  • 
deriving  an  advantage  over  the  best  employers. 

Therefore,  every  voluntary  scheme  whicli  is  introduced,  brings 
some  more  powerful  ally  to  the  cause  of  compulsory  insurance. 

Soldiers  who  are  injured  in  the  service  of  their  country  claim 
antl  receive  public  support.  Americans  boast  of  their  generosity 
to  the  veterans  of  the  Civil  War.  The  workers  engaged  in  modern 
industries  are  as  much  social  servants  as  soldiers  fighting  for  their 
counti-v.  How  humiliating  then  it  is  to  a  self-respecting  citizenship 
that  tlie  families  of  those  who  are  injured  or  killed  in  public  or 
social  service,  should  bear  the  whole  burden  of  their  support,  or 
that  the  unfortunate  soldier  of  industry  should  suffer  from  inade- 
quate support.  In  no  state  of  the  Union  is  there  at  present  an 
insurance  law  which  does  justice  to  injured  workers  and  their 
families.  We  Americans  are  among  the  greatest  sinners  in  this 
matter.  \\'ith  our  great  wealth,  we  do  the  least.  Shame  alone 
must  soon  urge  us  to  action  in  this  matter.      (Applause.) 

Mr.  Jones  (of  Xew  York)  :  :\Ir.  Chairman  and  Gentlemen— I 
have  been  very  much  interested  in  what  Mr.  ]\Iartin  said,  and  I 
would  like  to  ask  :\Ir.  :^Iartin,  who  evidently  has  given  this  ques- 
tion considerable  thought,  whether,  carried  to  its  limits,  compulsory 
insurance  would  not  solve  the  question  of  labor  unionism?  It  struck 
me  so  as  I  listened  to  him.  It  seems  to  me  that  all  that  holds 
labor  unions  together  is  the  benefit  they  ofifer  in  time  of  non-em- 
ployment, sickness  or  death,  from  the  amount  contributed  weekly 
by  the  workmen.  If  that  amount  were  provided  by  the  state,  if 
compulsory  insurance  became  a  fixed  thing,  would  not,  I  ask  Mr. 
Martin,  as  an  ultimate  result,  the  labor  organizations  fall? 


106  NATIONAL    BUSINESS     CONGRESS 


Mr.  Martin:  I  think  they  would.  I  agree  with  you  there.  I 
think  tlie  time  has  come  for  insurance,  after  the  actions  of  the  Mc- 
Namaras.  I  tliink  it  is  proven  that  the  working  men  in  our  land 
have  never  really  been  heard  from.  They  have  been  under  the 
power  of  the  chairmen  of  their  organizations,  or  whatever  officer  it 
was,  and  if  they  showed  any  independence  or  showed  any  desire 
to  debate,  or  discuss  things,  they  have  been  crushed  and  their  fami- 
lies and  themselves  have  been  made  slaves.  That  has  all  been  proven 
by  the  confessions  of  McNamara,  and  T  think  the  time  has  come 
for  compulsory  insurance;  and  I  also  think  it  is  going  to  be  a  vast 
benefit  to  the  world.  The  German  Ambassador  to  England  and 
myself  discussed  the  subject  for  two  hours  and  he  said  to  me:  "Fred 
Martin,  it  has  solved  the  problem  of  poverty  in  the  land."  He  said : 
"The  way  our  men  were  leaving  our  land  has  stopped ;  since  it  has 
been  put  in  practice  in  our  land  it  has  practically  stopped  it  all. 
Very  few  of  them  are  going  comparatively.  It  raises  the  laborer 
to  a  position  of  self  respect;  it  makes  him  feel  that  in  some  way 
he  is  a  co-partner  with  his  employer;  and  when  a  man  is  worried 
about  some  accident  befalling  him,  or  falling  ill  and  being  unable 
to  pay  the  doctor,  he  cannot  do  his  work  as  well  as  a  strong  man 
without  those  worries,  and  he  works  with  an  interest,  and  as  though 
he  were  in  co-partnership  with  his  employer." 

Last  ]\Iay  w'hen  Lloyd  George  sprang  this  question  upon  Eng- 
land I  became  very  much  interested,  and  have  been  studying  it  ever 
since.    I  have  the  feeling  that  it  is  going  to  allay  the  unrest. 

Mr.  Bruce  (of  Wisconsin)  :  Mr.  Chairman,  I  would  like  to 
ask  ^Ir.  Alartin  a  question,  but  before  doing  so  I  want  to  say  this: 
I  spent  considerable  time  in  Germany  and  England  last  year  study- 
ing this  question  for  the  purpose  of  aiding  in  the  formulation  of 
considerable  legislation  in  the  State  of  Wisconsin.  I  agree  to  the 
humanitarian,  the  ethical  arguments  that  Mr.  Martin  advances,  and 
I  want  to  say  that  I  believe  the  average  American  manufacturer  is 
as  humane  and  as  just  as  are  the  manufacturers  of  the  Old  Coun- 
try, but  I  would  like  to  have  Mr.  Martin  tell  us  how  w^e  can  make 
a  law  that  is  compulsory? 

He  has  pointed  to  Germany  several  times.  Germany  has  today 
the  best  workmen's  compensation  act  in  the  world.  I  would  like  to 
ha\'c  him  tell  me  how  we  can  make  a  law  of  that  kind  constitutional 
in  anv  one  of  the  American  states.    Li  Xew  York  state  the  law  has 


NATIONAL     BUSINESS     CONGRESS 107 

been  declared  unconstitutional.  In  Wisconsin,  within  the  last  two 
weeks,  the  law  has  been  declared  constitutional,  but  because  the  law 
is  optional  and  not  compulsory.  I  would  like  to  know  how  he  can 
make  any  one  of  these  beneficent  industrial  insurance  laws,  or  work- 
men's compensation  laws  stick  and  be  constitutional  in  any  one  of 
the  American  states. 

Mr.  Martix  :  That  will  have  to  be  worked  out.  This  is  only 
the  synopsis.  I  am  writing  on  the  subject.  Some  of  the  maga- 
zines in  X'ew  York  have  asked  me  to  write  on  it. 

Mr.  Falk  (of  Wisconsin)  :  Mr.  Chairman,  I  should  like  to 
ask  ]\Ir.  Martin  and  ]\Ir.  Bruce  who  have  referred  to  the  German 
system,  whether  they  have  seen  the  literal  treatise  by  Herr  von 
Freudenberg  (I  think  he  is  the  president  of  the  German  Imperial 
Insurance  Office,  and  has  been  for  many  years),  who  goes  into  this 
subject  very  thoroughly  and  very  exhaustively,  and  I  think  every- 
one who  has  read  it  will  agree  with  me  that  it  is  a  great  work. 

r^lR.  Bruce:  I  have  learned  of  that  pamphlet  and  of  its  con- 
tents. While  in  Germany  I  made  it  a  point  to  interview  the  manu- 
facturers, the  employers,  the  employes,  and  some  of  the  political 
factors.  I  spent  considerable  time  with  the  socialist  leader  of  the 
German  Reischstag,  who  is  opposed,  and  has  been;  his  party  has 
been  opposed  because  it  would  bring  about  a  better  feeling  between 
employer  and  employes. 

The  argmnent  Mr.  ^vlartin  makes  is  correct,  as  far  as  my  hum- 
ble judgment  goes,  but  there  are  weaknesses  all  along  the  line.  I 
spent  some  time  with  the  people  in  the  larger  cities,  and  went  out  in 
the  villages,  and  every  village  in  Germany  has  some  industries,  and 
the  law.  being  compulsory,  reaches  every  wage  w^orker,  except  cer- 
tain superintendents  and  officials  in  manufacturing  concerns. 

Xow,  that  the  German  law  is  protected,  is  demonstrated  by 
this  fact:  The  Reichstag,  in  1881,  with  the  German  Professor,  de- 
vised this  law.  Last  year  when  I  was  in  Germany  there  were  amend- 
ments submitted  to  the  Reichstag  that  filled  a  large  volume ;  so  that 
I  think  you  may  say  any  of  these  systems  may  be  found  fault  with. 
I  do  not  agree  with  the  charge  that  the  German  industrial  law  is  a 
failure.  I  do  hold,  as  others  there  hold,  that  it  is  defective  in  many 
respects ;  but  a  few  years  ago,  at  a  big  labor  conference  in  Rome,  it 
was  openly  agreed  by  the  economists  throughout  Europe,  who  were 


108  NATIONAL     BUSINESS     CONGRESS 

represented  at  this  great  Congress,  that  Germany  had  a  most  effi- 
cient industrial  insurance  law,  in  fact  the  most  efficient  in  the  world. 
And  why  is  it  efficient?  Because  it  is  absolutely  compulsory;  there 
is  no  way  of  getting  away  from  it. 

~  But  I  say,  gentlemen,  the  best  law  that  was  ever  devised  on  this 
subject  cannot,  as  far  as  experience  goes  in  this  country,  be  made 
compulsory,  and  I  would  like  to  see  the  legal  genius  come  here  and 
tell  us  how  such  a  law  can  be  made  compulsory. 

Mr.  Sechler  (of  JNIoline,  Illinois)  :  Mr.  Chairman,  while  in 
the  last  five  years  there  has  been  an  influx  of  Italian  and  Greek 
laborers  in  our  town,  simply  coming  to  this  country  to  accumulate 
a  small  amount  of  money  and  go  back  and  live  in  their  own  coun- 
tries, the  body  of  men  who  have  been  working  steadily,  85  per  cent 
of  the  working  men  of  Moline,  own  their  own  homes.  The  sav- 
ings deposits  in  our  savings  banks  amount  to  $7,000,000,  which 
represents  practically  the  savings  of  4,000  working  men,  or  an 
equivalent  of  about  $1,750  per  man.  In  the  larger  establish- 
ments the  men  have  their  mutual  aid  organizations,  providing  for 
sick  benefits  and  burial  expenses,  and  in  the  older  concerns  they 
have  a  pension  which  has  gone  into  effect  the  last  year,  that  after 
a  certain  term  of  years  in  service  a  man  is  retired  on,  I  think,  two- 
thirds  of  the  pay  which  he  had  been  receiving  during  his  working 
time.  That  is  one  town.  I  have  no  doubt  there  are  other  places 
that  can  duplicate  it. 

Moline  may  be  an  exception.  This  I  will  say  to  INIr.  Kirby; 
]\Ioline  is  an  open  shop  from  end  to  end.  There  are  no  drains  on 
the  men's  wages  for  the  support  of  Mr.  Gompers  and  his  auxili- 
aries. But  I  believe  if  that  same  condition  extended  through  the 
country,  as  we  have  it  there,  it  would  obviate  the  necessity  of  fra- 
ternal insurance  on  the  part  of  the  federal  or  state  government. 
As  I  stated  the  amount  of  savings  represented  by  our  workmen 
there,  probably  they  average  more  than  any  amount  of  insurance 
that  could  be  given  by  the  state. 

:\Ir.  Briggs  (of  Minnesota)  :  A  question  that  has  interested 
me  very  keenly  is  this :  As  I  understand  it,  Germany  has  had  this 
insurance  law,  or  workmen's  compensation  act  for  something  like 
twenty  years;  England  for  some  time.  As  a  result  did  that  solve 
the  question  of  unionism  in  those  countries?     I  understood  you  to 


NATIONAL     BUSINESS     CONGRESS  109 

say  you  thought  it  would  in  those  countries.    Would  it  in  this  coun- 
try ? 

Mk.  ^Martin  :  I  do  not  understand  it  is  in  operation  in  Eng- 
land. 

Mr.  Briggs:    Yes. 

Mr.  Martin  :    Just  being  put  in  operation? 

]\1r.  Briggs:    It  has  been  there  for  years. 

Mr.  Bruce:  England  adopted  its  workmen's  compensation  act 
a  little  over  two  years  ago ;  they  had  had  about  one  year's  experi- 
ence when  I  was  there.  The  effect  of  the  law  was  this :  That  it 
increased  the  insurance  rate  materially  and  also  increased  the  liti- 
gation and  did  not  cement  between  employer  and  employe. 

Mr.  Briggs  :    Thank  you. 

A  Delegate:     I  move  the  convention  adjourn  for  luncheon. 

The  Chairman  :  Gentlemen,  before  we  adjourn,  I  wish  to 
announce  that  there  will  be  a  free  discussion  on  the  business  sub- 
jects directly  after  the  address  by  yiv.  Pavey.  I  beg  that  you  will 
all  meet  promptly  at  half  past  two. 

The  meeting  adjourned  until  2  :30  o'clock  P.  M. 


no  NATIONAL     BUSINESS     CONGRESS 

FOURTH  SESSION. 


Tuesday,  December  12,  1911. 
2 :30  o'clock  P.  M. 


Tlie  Congress  was  called  to  order  by  President  Sheldon. 

]\Ir.  Boothe:  Mr.  Chairman,  up  until  a  few  moments  ago  I 
was  living  under  a  considerable  misapprehension.  I  speak  now 
because  there  may  be  others  here  laboring  under  the  same  misap- 
prehension. I  was  under  the  idea  that  this  convention  was  a  con- 
vention of  the  National  Business  League  of  America,  and  I  spoke 
under  that  misapprehension.  As  perhaps  most  of  you  know,  and 
all  men  ought  to  know,  this  is  a  convention  held  in  Chicago  through 
the  courtesy  of  the  National  Business  League  of  America  as  our 
entertainers,  but  is  a  convention  of  the  business  men  of  this  coun- 
try, the  National  Business  Congress,  and  if  there  are  any  now  labor- 
ing under  the  misapprehension  that  it  is  simply  a  convention  of  the 
National  Business  League  of  America,  it  ought  to  be  corrected. 

The  Chairman  :  I  think  it  is  pretty  thoroughly  understood 
that  this  is  not  the  convention  of  the  Business  League.  It  is  a 
National  Business  Congress  under  the  auspices  of  the  National 
Business  League,  which  is  one  of  the  delegates  and  has  its  delegates 
on  the  floor,  the  same  as  any  other  organization. 

We  have  one  or  two  resolutions  here  that  have  been  sent  in  that 
I  should  like  to  have  read  and  then  referred  to  the  Resolutions 
Committee,  which  is  going  into  session  very  soon.  After  that  we 
will  proceed  with  the  regular  business. 

The  following  communication  was  read : 

George  W.  Sheldon,  Esq., 

President  of  the  National  Business  League. 

I  submit  the  enclosed  on  waterways  which  I  would  appre- 
ciate being  read  to  the  Congress  if  an  opportune  time  presents 
itself.  This  is  the  briefest  manner  in  which  I  could  bring  it  up, 
and  having  become  deaf  will  not  trust  my  voice  to  enter  it 
verbally.  Respectfully  yours, 

G.    BOGGS, 

Delegate  for  Baltimore. 


NATIONAL     BUSINESS     CONGRESS m 

To  the  President  and  ^vlcmbers  of  the  National  Business  Con- 
gress. 

Gentlemen : 

In  the  Official  Program  of  the  National  Business  Congress 
the  delegates  are  invited  to  make  terse  suggestions  on  the  sub- 
jects that  might  be  of  interest  to  this  important  meeting.  Tak- 
ing advantage  of  this,  and  in  view  of  the  many  questions  of 
national  importance  which  have  the  attention  of  Congress,  I 
will  call  your  attention  to  that  very  vital  one,  the  development 
of  the  waterways  of  the  United  States.  Every  man  who  has 
taken  an  interest  in  this  subject  knows  that  our  methods  here- 
tofore have  been  haphazard,  inefficient  even  to  the  point  of 
the  ridiculous.  It  has  gone  further  in  this  line  and  river  and 
harbor  appropriations  have  earned  the  term  "pork  barrel."  The 
National  Rivers  and  Harbors  Congress,  which  was  organized 
in  Baltimore  in  1901,  has  been  striving  to  bring  about  a  scien- 
tific plan  and  policy  for  the  efficient  and  sensible  improvement 
of  our  internal  waterways.  It  has  adopted  a  policy,  not  a  proj- 
ect, for  this  purpose.  Waterways  Associations  have  been 
organized  in  the  several  sections  of  the  country  and  are  earn- 
estly at  work  on  their  enterprises,  and  are  uniting  with  the 
now  great  Rivers  and  Harbors  Congress  in  the  national'move- 
ment  for  developing  waterways  along  the  plan  like  that  in 
vogue  in  the  great  European  countries.  The  European  coun- 
tries in  this,  that  they  have  eliminated  all  local  interests  in 
order  to  make  the  matter  a  uniform  and  national  one.  Among 
those  bodies  are  the  Lakes-to-the-Gulf  Deep  Waterway  Asso- 
ciation and  the  Atlantic  Inland  Waterway  Association.  The 
purpose  of  the  former  is  to  open  adequate  navigation  between 
the  Great  Lakes  and  the  Gulf  of  ^Mexico;  that  of  the  latter  is 
to  provide  deeper  waterways  from  Cape  Cod  to  the  Gulf  of 
Mexico,  avoiding  the  ocean  graveyards  along  the  New  Eng- 
land coast  and  Cape  Hatteras.  This  will  not  only  subserve 
common  interests,  but  the  national  defense.  We,  therefore, 
recommend  and  urge  that  this  Congress  put  itself  on  record 
on  the  development  of  the  waterways  of  the  United  States 
along  the  most  efficient  lines. 

Respectfully  submitted, 

G.    BOGGS, 

"  "Delegate  Representing  the  Merchants  and  Manufacturers' 
Association  of  Baltimore,  Md. 


112  NATIONAL     BUSINESS     CONGRESS 

The  Chairman:  Gentlemen,  what  is  your  pleasure  with  this 
resolution?  If  there  is  no  ohjection,  we  will  refer  it  at  once  to  the 
Resolutions  Committee  and  let  them  make  their  report  on  it.  W'e 
will  so  refer  it. 

The  following  communication  was  read : 

Baltimore,  ]\Id.,  December  11. 
George  W.  Sheldon, 

Chairman  Kational  Business  Congress. 

Dear  Sir: 

As  a  delegate  of  the  Merchants  and  Manufacturers'  Asso- 
ciation of  Baltimore,  I  regret  to  inform  you  that  an  unlooked 
for  emergency  has  arisen  which  will  prevent  me  from  attend- 
ing the  National  Business  Congress  to  be  held  on  December 
11th,  12th  and  13th,  at  the  Congress  Hotel,  Chicago. 

Much  has  been  said  and  written  regarding  the  conserva- 
tion of  forests,  coal  and  public  lands,  but  I  have  heard  no  one 
.defending  and  extending  a  protecting  hand  over  the  business 
interests  of  the  land  from  which  95,000,000  people  must  largely 
derive  food,  clothing  and  shelter.  On  the  other  hand,  legislation 
is  enacted  and  being  enacted  by  Congress  and  by  nearly  every 
State  Legislature  which  is  not  only  against  public  service  cor- 
porations, but  against  every  other  corporation  and  business 
interest  of  any  importance.  May  I  trust  that  this  view  of  the 
situation  will  be  discussed? 

Regretting  I  cannot  be  with  you,  I  beg  to  remain, 

With  great  respect,  John  R.  Blank, 

The  Chairman  :  Gentlemen,  if  there  is  no  objection  we  will 
refer  this  to  the  Resolutions  Committee,  with  the  other  resolution. 

I  now  have  the  pleasure  of  introducing  the  Honorable  Frank 
D  Pavey  of  New  York,  who  will  address  us  on  "AMENDAIEXT 
OF  THE  SHERMAN  ANTI-TRUST  LAW,  TO  PROTECT 
LEGITIMATE  COMBINATIONS  OF  LABOR  AND  CAPI- 
TAL."    (Applause.) 

Mr.  Frank  D.  Pavev  :  ]Mr.  Chairman  and  Gentlemen— When 
I  was  invited  to  make  an  address  before  this  Congress  I  telegraphed 
to  your  Secretary  and  asked  if  I  could  have  leave  to  print,  and  I 
have  printed,  the  views  which  I  then  entertained  in  New  York. 
Now,  since  I  have  been  in  Chicago  my  view  has  somewhat  changed. 


NATIONAL     BUSINESS     CONGRESS  113 

In  the  first  place,  there  has  been  a  i)ersonal  change  in  my  point  of 
view.  I  left  New  York  under  the  impression  that  business  in  this 
country  was  under  serious  depression,  and,  as  a  result  of  a  two 
days'  stay  here,  having  dined  and  lunched  yesterday  with  Mr.  Shel- 
don, I  have  come  to  the  conclusion  that  business  in  Chicago  lives  in 
a  bower  of  roses  and  sails  on  a  sea  of  champagne.  (Laughter.) 
Personally,  I  am  entirely  relieved  of  that  dyspeptic  idea  that  busi- 
ness is  under  any  depression  out  here.  But  in  a  much  more  seri- 
ous way  my  point  of  view  has  changed,  and  it  is  perhaps  not 
entirely  changed,  but  modified,  and  it  has  been  modified  by  the 
broad  expressions  of  view  that  I  have  heard  here  from  Mr.  Revell 
and  Mr.  Wallis  and  Mr.  Kirby  upon  the  same  general  subject  upon 
which  I  am  speaking.  I  do  not  include  in  that  remark  addresses 
delivered  by  Mr.  Martin  and  Dr.  MacClintock  and  Mr.  Rosenthal, 
because  those  were  upon  subjects  a  little  more  remote  from  the  one 
upon  which  I  am  going  to  speak. 

Now,  I  was  brought  up  as  a  good  Presbyterian,  and  I  was 
always  very  much  impressed  with  the  fact  that  an  orthodox  Presby- 
terian minister,  before  giving  utterance  to  his  own  ideas  always 
read  what  he  called  the  text  from  which  he  was  going  to  preach, 
and  following  the  custom  of  this  old  Presbyterian  minister,  under 
whom  I  received  my  early  religious  training.  I  wrote  out  what  I 
would  call  the  text  of  my  remarks,  and,  while  reading  is  always 
more  or  less  tedious,  I  am  going  to  read  those  two  printed  pages  in 
order  that  I  may  bring  before  the  gentlemen  here  the  text  of  my 
remarks,  and  then  I  can  fit  my  remarks  into  them  as  I  go  along. 

I  start  with  the  proposition  that  no  court  or  executive  depart- 
ment or  industrial  commission  can  enforce  a  wrong  law  so  as  to  pro- 
duce right  results. 

The  question  whether  the  determination  of  particular  cases 
shall  be  made  by  the  courts  or  by  an  executive  department  or  by 
an  industrial  commission  is  a  matter  of  convenience  and  efificiency 
in  the  enforcement  of  the  law  and  not  a  matter  of  principle.  The 
decision  of  all  such  questions  must  be  made  by  men.  The  selection 
of  the  set  of  men  is  a  matter  of  policy.  Their  application  of  the 
law  to  particular  cases  will  in  any  event  be  full  of  errors  of  human 
judgment  and  opinion. 

As  long  as  the  lazv  is  wrong  in  principle  their  decisions  can- 
not he  just  and  at  the  same  time  in  accordance  with  the  law  and 
facts. 


114  NATIONAL     BUSINESS     CONGRESS 

All  will  agree  that  the  law  ought  to  recognize  and  protect  all 
legitimate  combinations  of  labor  and  capital.  An  agreement  as  to 
what  combinations  of  labor  and  capital  are  legitimate  is  difficult. 
Every  man's  opinions  will  be  influenced  by  his  training  and  environ- 
ment even  when  they  are  not  controlled  by  his  immediate  business 
interests. 

The  conclusions  of  the  writer  are  that  the  Sherman  Anti-Trust 
Law  ought  to  be  amended  so  as  to  provide  in  substance : 

(a)  All  organizations,  associations,  combinations  and  agree- 
ments the  purpose  and  effect  of  which  are  to  increase  the  wages  and 
improve  the  conditions  of  employment  of  labor  are  lawful  unless 
they  violate  rights  of  life,  liberty  or  property. 

(b)  All  organizations,  associations,  combinations  and  agree- 
ments the  purpose  and  effect  of  which  are  to  regulate  competition, 
improve  the  conditions  of  business  and  increase  the  profits  of  capi- 
tal are  lawful  unless  they  violate  rights  of  life,  liberty  or  property 
or  injure  trade  or  commerce. 

(c)  Congress  shall  from  time  to  time  define  and  prohibit  spe- 
cific acts  and  things  which  are  deemed  to  injure  trade  or  commerce. 

(d)  Violations  of  the  law  shall  be  punished  by  penalties  im- 
posed upon  the  individuals  responsible  for  the  violations  and  not 
by  injury  to  business  or  destruction  of  investments  or  confiscation 
of  property. 

The  test  proposed  for  labor  organizations  is  that  they  shall 
not  violate  rights  of  life,  liberty  or  property.  These  rights  have 
been  the  subject  of  so  much  adjudication  both  in  the  Federal  and 
the  State  courts  that  no  statutory  definitions  of  them  are  necessary. 

Another  test  is  added  for  organizations  of  capital,  viz.,  that 
they  shall  not  injure  trade  or  commerce.  By  reason  of  the  fact  that 
there  is  no  Federal  common  law  or  uniform  common  law  of  the 
States,  statutory  definitions  of  injuries  to  interstate  trade  and  com- 
merce as  well  as  statutory  remedies  are  necessary. 

The  facts  and  reasons  which  lead  to  these  conclusions  are  set 
forth  in  the  annexed  argument. 


NATIONAL     BUSINESS     CONGRESS  115 


ARGUMENT. 


THE    SHERMAN    ANTI-TRUST    LAW. 


The  Sherman  Anti-Trust  Law  does  five  things: 

1.  It  declares  that  all  contracts  or  combinations  in  restraint 
of  interstate  trade  or  commerce  are  illegal  and  that  all  persons 
who  monopolize  or  attempt  to  monopolize  any  part  of  interstate 
trade  or  commerce  are  criminals. 

2.  It  makes  all  violations  of  the  law  misdemeanors,  punish- 
able by  fine  and  imprisonment. 

3.  It  confers  upon  the  United  States  courts  jurisdiction  to 
punish  violations  of  the  law  and  imposes  upon  the  United  States 
district  attorneys  the  duty  of  enforcing  the  law. 

4.  It  provides  for  the  forfeiture  to  the  United  States  of  any 
property  owned  under  any  such  contract  or  by  any  such  combina- 
tion. 

5.  It  confers  upon  persons  who  are  injured  in  their  business 
or  property  by  reason  of  violations  of  the  law  the  right  to  recover 
damages  for  the  injury. 

All  criticism  of  the  Sherman  Anti-Trust  Law  must  refer  to 
the  sections  which  declare  that  all  contracts  in  restraint  of  inter- 
state trade  or  commerce  are  illegal  and  that  all  persons  who  monop- 
olize or  attempt  to  monopolize  any  part  of  interstate  trade  or  com- 
merce are  criminals. 

Plainly  there  can  be  no  objection  to  making  the  violation  of 
any  law  a  misdemeanor,  punishable  by  fine  and  imprisonment;  or 
to  conferring  upon  courts  jurisdiction  to  punish  violations  of  any 
law ;  or  to  imposing  upon  the  district  attorneys  the  duty  of  enforc- 
ing any  law;  or  to  giving  persons  injured  by  any  illegal  act  the 
right  to  recover  damages. 

The  forfeiture  to  the  United  States  of  any  property  owned 
under  any  such  contract  or  by  any  such  combination  would  be  so 
ineffectual  as  a  remedy  for  any  of  the  evils  intended  to  be  cured 
by  the  law  that  almost  no  efifort  has  been  made  to  enforce  the  pro- 
visions of  that  section. 

A  MENACE  TO  PROSPERITY. 

A"  list  recently  compiled  from  Moody's  Manual  shows  that  not 
less  than  1,198  corporations  with  8,110  subsidiaries  representing  a 


116  NATIONAL     BUSINESS     CONGRESS 


total  capitalization  of  $10,612,372,489  are  "holding  companies" 
within  the  prohibition  of  the  law.  Many  holding  companies  are 
not  reported  in  Moody's  Manual.  There  is  a  legion  of  bondhold- 
ers, stockholders  and  laborers  the  stability  of  whose  investments 
or  employment  will  be  endangered  by  the  general  attempt  to  enforce 
the  act. 

Practically  all  trade  organizations  and  associations  for  the  im- 
provement of  business  conditions  which  do  anything  more  than 
have  an  annual  clambake  exist  in  violation  of  the  law.  All  labor 
organizations  incur  its  penalties  whenever  they  strike  or  attempt 
by  concert  of  action  to  increase  their  wages  or  improve  their  condi- 
tion. 

The  law  as  it  stands  is  unjust  and  injurious  to  public  interests 
and  its  general  enforcement  is  a  menace  to  present  prosperity  and 
may  be  a  permanent  injury  to  the  trade  and  commerce  of  the 
country. 

The  answer  may  be  made  that  the  Supreme  Court  in  the  recent 
decisions  in  the  Standard  Oil  and  American  Tobacco  cases  has  laid 
down  a  safe  rule  for  the  guidance  of  business.  This  idea  has  been 
advanced  by  President  Taft,  who  is  reported  to  have  said  in  a 
speech  at  Aberdeen,  S.  D. : 

I  have  challenged,  and  I  challenge  again,  any  person  to 
cite  a  case  that  he  would  condemn  as  a  violation  of  the  Anti- 
Trust  Law  that  would  not  be  condemned  under  the  decision 
of  the  Supreme  Court.    As  yet  I  have  heard  no  reply. 

The  correct  reply  is  that  no  person  can  cite  a  case  that  zuould 
not  be  condemned  as  a  violation  of  the  Sherman  Anti-Trust  Law 
under  the  decision  of  the  Supreme  Court  because  the  Supreme 
Court  has  not  defined  any  case  that  zvoiild  not  be  condemned. 

It  has  decided  that  certain  cases  which  have  already  come 
before  it  are  violations  of  the  law  and  that  cases  which  come  before 
it  in  future  will  be  "determined  by  the  light  of  reason,  guided  by 
the  principles  of  law  and  the  duty  to  apply  and  enforce  the  public 
policy  embodied  in  the  statute." 

With  this  lucid  rule  as  a  guide  the  business  of  the  country  is 
left  to  guess  what  will  be  the  decision  of  the  Supreme  Court  in 
selected  cases  brought  before  it  in  future  at  the  will  of  the  Presi- 
dent and  Attorney  General. 


NATIONAL     BUSINESS     CONGRESS  117 


THE  FETICH  OF  COMPETITION. 
Much  confusion  in  the  reasoning  and  decision  of  cases  lias 
grown  out  of  the  faikire  of  the  courts  to  distinguish  between  re- 
straints of  trade  and  restraints  of  competition.  The  Sherman  Anti- 
Trust  Law  prohibits  restraints  of  trade  and  does  not  prohibit  re- 
straints of  competition.  In  the  application  of  the  law  the  courts 
have  treated  all  contracts  or  combinations  in  restraint  of  competi- 
tion as  contracts  or  combinations  in  restraint  of  trade.  This  fal- 
lacious application  of  the  law  has  its  foundation  in  the  ancient  and 
honorable  maxim  of  economics  that  "competition  is  the  life  of 
trade."  The  courts  have  generally  accepted  this  maxim  as  the 
basis  of  their  reasoning  in  the  decision  of  cases  arising  under  laws 
in  regard  to  restraint  of  trade.  Their  reasoning  has  been  that 
inasmuch  as  competition  is  the  life  of  trade  anything  which  re- 
strains competition  must  necessarily  restrain  trade. 

This  economic  doctrine  may  have  been  true  when  applied  to 
the  industrial  conditions  existing  in  the  time  of  Adam  Smith.  But 
when  applied  to  the  conditions  of  modern  industry  unrestrained 
competition  may  be  the  death  of  trade.  It  does  not  require  much 
business  experience  to  know  that  contracts  or  combinations  in  rea- 
sonable restraint  of  reckless  competition  may  promote  trade,  im- 
prove business  conditions  and  increase  the  profits  of  capital  and 
wages  of  labor  without  injury  to  any  public  interest. 

The  primary  purpose  of  every  trades  union,  federation  of  labor 
or  brotherhood  of  workmen  is  to  restrain  competition  by  securing 
for  all  their  members  uniform  wages  for  the  same  work  and  uni- 
form hours  of  labor  for  all.  No  member  is  to  be  allowed  to  com- 
pete against  another  either  for  more  pay  per  hour  or  for  more  hours 
per  day.  Every  law  fixing  the  number  of  hours  that  shall  constitute 
a  day's  labor  is  an  enactment  in  restraint  of  competition.  Every 
law  prescribing  terms  and  conditions  upon  which  persons  may  en- 
gage in  various  occupations  is  a  restraint  upon  competition.  The 
number  of  legalized  restraints  upon  competition  is  so  great  that  an 
enumeration  and  description  of  them  would  fill  a  volume. 

Notwithstanding  these  facts  the  confidence  of  public  officials 
in  the  inherent  virtue  of  competition  as  a  sure  cure  for  all  indus- 
trial and  commercial  evils  is  undiminished.  While  the  Attorney 
General  is  talking  in  favor  of  the  restoration  of  competition  the 
Department  of  Justice  of  which  he  is  the  head  has  been  drawing  a 
decree  in  the  United  States  District  Court  for  the  Northern  Dis- 


118  NATIONAL    BUSINESS     CONGRESS 

trict  of  Ohio  in  the  case  of  the  General  Electric  Company  and 
about  thirty-five  subsidiary  and  affiliated  companies  which  con- 
tains the  following  remarkable  clause: 

Eighth  :  That  the  General  Electric  Company  and  the 
other  defendants  are  each  enjoined  and  restrained  from  offer- 
ing or  making  more  favorable  prices  or  terms  of  sale  for  in- 
candescent electric  lamps  to  the  customers  of  any  rival  manu- 
facturer or  manufacturers  than  it  at  the  same  time  offers  or 
makes  to  its  established  trade,  where  the  purpose  is  to  drive 
out  of  business  such  rival  manufacturer  or  manufacturers,  or 
otherwise  unlawfully  to  restrain  the  trade  and  commerce  of 
the  United  States  in  incandescent  electric  lamps;  provided  that 
no  defendant  is  enjoined  or  restrained  from  making  any  prices 
for  incandescent  electric  lamps  to  meet,  or  to  compete  with, 
prices  made  by  any  other  defendant,  or  by  any  rival  manufac- 
turer; and  provided  further  that  nothing  in  this  decree  shall 
be  taken  in  any  respect  to  enjoin  or  restrain  fair,  free  and 
open  competition. 

This  portion  of  the  decree  is  either  a  joke  or  an  injustice.  The 
companies  in  the  combination  were  enjoined  from  entering  into  any 
combination  or  agreement  fixing  prices  for  incandescent  electric 
lamps.  What  need  of  any  agreement  fixing  prices  when  the  court 
at  the  request  of  the  government  enjoins  companies  practically  con- 
trolling the  entire  trade  of  the  country  from  cutting  prices.  It  is 
not  surprising  that  the  companies  in  the  combination  all  consented 
to  the  making  of  this  decree. 

If  there  were  no  independent  companies  the  decree  was  a 
joke  on  the  American  people  by  the  Attorney  General  with  the  con- 
sent of  the  companies  and  the  approval  of  the  court.  If  there  were 
independent  companies  the  decree  was  an  injustice  because  the 
independent  companies  were  not  parties  to  the  suit  and  were  not 
enjoined  from  seeking  to  injure  the  business  and  secure  the  trade 
of  the  companies  in  the  combination  by  cutting  prices. 

Whether  joke  or  injustice,  it  was  doubtless  perpetrated  unwit- 
tingly. The  man  who  drew  the  decree  was  dimly  conscious  of  the 
fact  that  the  object  truly  desirable  to  be  attained  was  not  the  main- 
tenance of  competition,  but  the  maintenance  of  stability  in  trade. 
He  therefore  enjoined  the  companies  from  using  the  only  effective 
method  of  competition,  but  added  a  disclaimer  of  any  intention  of 
backsliding  from  the  orthodox  faith  in  competition. 


NATIONAL     BUSINESS     CONGRESS 119 

THE  TRUE  RULE   OF  COMPETITION. 

The  fundamental  principle  of  competition  is  the  law  of  the 
survival  of  the  fittest.  Competition  means  success  for  the  strong 
and  failure  for  the  weak.  The  authors  of  the  platform  of  the 
Socialist  part}'  adopted  at  Chicago  on  May  13,  1908,  scorned  all 
popular  pretenses  on  the  subject.  Without  equivocation  or  cir- 
cumlocution they  wrote  this  elementary  commentary  on  the  futility 
of  all  legislative  efforts  to  uphold  the  divine  right  of  competition 
to  be  the  ruler  of  industrial  life: 

Individual  competition  leads  inevitably  to  combinations  and 
trusts.  No  amount  of  Government  regulation,  or  of  publicity 
or  of  restrictive  legislation  will  arrest  the  natural  course  of 
modern  industrial  development. 

If  the  American  people  can  be  led  to  abandon  the  worship  of 
competition  as  the  idol  of  industrial  life  and  accept  the  doctrines 
of  co-operation  and  union  which  have  brought  them  so  much  bene- 
fit in  their  political  life  they  will  derive  even  greater  benefits  from 
those  forces  in  their  industrial  life. 

The  Sherman  Anti-Trust  Law  is  equally  unsound  in  its  pro- 
hibition of  any  and  all  attempts  to  monopolize  "any  part  of  the 
trade  or  commerce  among  the  several  states  or  with  foreign  na- 
tions." 

Every  man  who  is  in  business  is  continually  attempting  to 
monopolize  some  part  of  the  trade  or  commerce  among  the  several 
states  or  with  foreign  nations.  Every  man  is  trying  to  monopolize 
his  own  business  and  to  acquire  that  of  his  competitors.  If  this 
section  of  the  law  has  any  meaning  in  an  economic  sense  it  pro- 
hibits competition  in  all  forms.  The  evils  which  are  intended  to 
be  condemned  by  this  section  against  monopoly  only  arise  when 
the  monopoly  has  been  established. 

Sound  economic  doctrines  in  reference  to  the  permanence  of 
the  industrial  development  known  as  the  "trusts"  were  never  bet- 
ter stated  than  by  that  distinguished  advocate  of  Socialism  Eugene 
\^  Debs  in  an  article  on  the  "Problem  of  the  Trusts,"  published  in 
the  New  York  Times,  on  Saturday.  Xovember  25,  1911 : 

No  student  of  economics  and  no  intelligent  observer  of 
events  believes  the  trust  can  be  forced  back  into  its  constituent 
and- competing  elements  to  satisfy  the  cry  of  a  defeated  and 
doomed  middle  class.     Onlv  the  academic  charlatan  and  polit- 


120  NATIONAL     BUSINESS     CONGRESS 

ical  demagogue,  seeking  to  promote  their  own  selfish  ends,  yield 
to  the  clamor  of  the  small  interests  that  the  trust  be  "smashed" 
and  that  we  return  to  "the  good  old  days  of  competition." 

This  is  but  a  repetition  of  the  cry  of  the  weavers  and  spin- 
ners of  England  against  the  introduction  of  the  machinery 
which  threatened  to  displace  them.  It  is  the  protest  of  the 
stage  coach  against  the  locomotive  and  of  the  pony  express 
against  the  railroad  and  telegraph. 

What  is  a  trust?  Not  a  combination  of  capitalists,  as  so 
many  seem  to  imagine,  for  the  capitalists  are  only  incidental 
to  the  trust,  as  the  owner  of  a  mill  is  incidental  to  the  mill. 
If  all  the  capitalists  who  own  the  trusts  were  to  disappear 
from  the  face  of  the  earth,  the  trusts  in  all  their  inherent 
power  and  j)otentiahty  would  still  be  here. 

The  railroads,  for  illustration,  and  not  the  individuals 
who  happen  to  own  them,  constitute  the  railroad  trust.  The 
steel  mills  and  their  accessories  and  equipments  of  machinery 
for  the  production  of  steel,  and  not  the  stockholders,  constitute 
all  that  is  vital  and  essential  to  the  Steel  Trust. 

CAPITALISM  AND  SOCIALISM. 

From  these  sound  economic  doctrines  Mr.  Debs  draws  the  con- 
clusion that  we  are  limited  to  a  "choice  between  industrial  despot- 
ism and  industrial  democracy,  that  is  to  say,  between  Capitalism 
and  Socialism."  He  does  not  define  the  organization  of  industry 
under  Socialism,  but  declares  that  it  has  "the  one  object  in  view  of 
abolishing  the  prevailing  system  of  privately  owned  industry  and 
establishing  in  its  place  the  industrial  democracy  in  which  all  the 
people  shall  be  free  to  produce  what  they  need  to  satisfy  their  needs 
and  wants,  and  free  to  enjoy  all  the  blessings  of  a  real  civilization." 

The  fundamental  difficulty  in  the  way  of  the  establishment  of 
any  such  Utopian  society  is  not  that  of  "abolishing  the  prevailing 
system  of  privately  owned  industry,"  but  of  abolishing  the  prevail- 
ing system  of  privately  ozvned  results  of  industry — i.  e.,  private 
property. 

The  laborer  who  consistently  invests  for  a  period  of  years  a 
portion  of  his  surplus  earnings  in  household  furniture  and  savings 
banks  will  find  himself  and  his  family  in  a  surer  way  "to  enjoy  all 
the  blessings  of  a  real  civilization"  than  the  laborer  who  invests 
the  same  portion  of  his  surplus  earnings  for  the  same  period  of 
time  in  whiskey  and  tobacco.     Until  Socialism  can  produce  equal- 


NATIONAL     BUSINESS     CONGRESS  121 


ity  of  condition  between  these  two  men  it  cannot  establish  any  such 
industrial  democracy  as  it  advocates. 

Private  ownership  of  property  is  not  a  product  of  civilization. 
It  existed  in  the  most  positive  form  among  the  redmen  of  Amer- 
ica who  cannot  be  said  to  have  enjoyed  many  of  the  blessings  of 
a  real  civilization.  "There  was  no  authority  in  an  Indian  com- 
munity powerful  enough  to  deprive  the  meanest  warrior  of  his 
property,  even  in  circumstances  of  the  greatest  public  exigency" 
(Parkman — "The  Conspiracy  of  Pontiac") 

Until  this  instinct  of  ownership  of  the  results  of  industry  and 
frugality  in  peace  and  courage  and  energy  in  war  can  be  eradicated 
from  the  breast  of  savage  and  civilized  man  there  can  be  no  indus- 
trial democracy  such  as  the  Socialists  dream  of. 

In  the  meantime  society  must  do  what  it  can  to  secure  for  all 
men  an  equal  opportunity  to  gain  the  private  ownership  of  a  fair 
share  of  the  results  of  combined  industry  under  a  system  which 
recognizes  the  fact  so  well  stated  by  Mr.  Debs  "that  the  trust  is 
simply  the  tzvcntieth  century  tool  of  production,  distribution  and 
exchange." 

DEFINITE   RULES   OF   LAW   NECESSARY. 

Definite  standards  of  what  combinations  of  labor  and  capital 
may  lawfully  do  under  the  existing  system  of  privately  owned  indus- 
try must  be  established.  Men  should  be  free  to  compete  and  strug- 
gle or  combine  and  co-operate  so  long  as  they  do  not  transgress 
necessary  and  proper  rules  for  the  protection  of  others  from  undue 
injur}'.  The  first  step  essential  to  progress  is  to  lay  the  foundations 
of  the  law  in  sound  economic  principles. 

There  has  been  much  discussion  as  to  "good  trusts"  and  "bad 
trusts"  and  the  effort  has  been  made  to  distinguish  between  "rea- 
sonable" and  "unreasonable"  restraints  of  trade.  All  this  discus- 
sion shows  that  the  language  of  the  present  statute  does  not  cor- 
rectly describe  the  thing  which  ought  to  be  condemned.  The  evil 
W'hich  is  sought  to  be  prohibited  is  not  a  restraint  of  trade  or  com- 
merce or  an  attempt  to  monopolize  some  part  of  trade,  but  an  injury 
to  trade  or  commerce. 

If  the  law  prohibited  all  organizations,  associations,  combina- 
tions or  agreements  which  violate  rights  of  life,  liberty  or  property 
or  injure  trade  or  commerce  it  w^ould  correctly  define  the  causes 
of  the  evils  which  it  seeks  to  obviate.  The  principle  of  the  law 
would  be  sound  and  its  practical  application  to  particular  cases 


122  NATIONAL     BUSINESS     CONGRESS 

would  be  less  difficult  than  at  present.  Under  our  Federal  system 
the  national  law  applicable  to  interstate  trade  and  commerce  can 
be  made  right  in  principle  only  by  act  of  Congress. 

NO  NATIONAL  COMMON  LAW  IN  THE  UNITED  STATES. 

There  is  no  common  law  which  constitutes  any  part  of  our 
National  or  Federal  jurisprudence  as  distinguished  from  the  juris- 
prudence of  the  several  states  composing  the  Union.  All  Federal 
law  is  founded  upon  and  derives  its  authority  from  the  constitution 
or  laws  of  the  United  States,  The  common  law  can  be  incorporated 
into  the  Federal  system  of  jurisprudence  only  by  Congressional 
enactment. 

The  Federal  courts  cannot  resort  to  the  common  law  as  a 
source  of  criminal  jurisdiction;  the  crimes  and  offenses  which  are 
cognizable  by  these  courts  are  such  only  as  are  expressly  or  by 
necessary  implication  designated  by  law  and  Congress  must  define 
these  crimes,  prescribe  their  punishment  and  confer  the  necessary 
jurisdiction  to  try  them. 

Even  in  the  jurisprudence  of  the  several  States  the  common 
law  of  England  cannot  be  taken  in  all  respects  to  be  that  of  Amer- 
ica. The  English  colonists  brought  with  them  from  their  mother 
country  its  general  principles  and  claimed  it  as  their  birthright, 
but  they  brought  with  them  and  adopted  only  that  portion  which 
was  applicable  to  their  needs  and  suitable  to  their  situation  and 
circumstances.  Louisiana  and  Texas  were  not  English  colonies  and 
the  French  and  Spanish  codes  were  the  foundation  of  their  com- 
mon law  jurisprudence.  Judicial  decisions  and  the  usages  and 
customs  of  the  respective  States  determine  in  general  how  far  the 
common  law  of  England  has  been  introduced  and  sanctioned.  The 
common  law  of  one  State  is  not  necessarily  that  of  another.  Each 
State  has  adopted  such  parts  as  are  desirable  and  suitable  to  its 
needs. 

In  the  absence  of  any  National  common  law  or  any  uniform 
common  law  of  the  States  an  act  of  Congress  is  necessary,  if  the 
Federal  Government  wishes  to  exercise  any  supervision  or  control 
over  combinations  of  labor  or  capital  in  reference  to  trade  and 
commerce  between  the  States  and  Territories  and  the  District  of 
Columbia  and  with  foreign  nations.  The  rule  in  reference  to  com- 
binations of  labor  should  not  be  the  same  as  the  rule  in  reference 
to  combinations  of  capital. 


NATIONAL    BUSINESS     CONGRESS  123 

RULE  FOR  COMBINATIONS  OF  LABOR. 

The  Sherman  Anti-Trust  Law  has  been  held  to  be  applicable 
to  labor  combinations  and  has  been  invoked  against  them  on  sev- 
eral occasions.  There  is  grave  doubt  as  to  whether  the  authors  of 
the  law  had  any  such  intention.  There  have  been  repeated  in- 
stances of  violations  of  the  law  by  labor  organizations  when  it  was 
not  invoked  against  them.  One  of  the  recent  instances  was  the 
strike  of  the  employes  of  the  express  companies  in  New  York  and 
New  Jersey  in  October  and  November,  1910.  For  a  period  of  more 
than  a  month  it  was  almost  impossible  for  any  interstate  trade  or 
commerce  in  express  packages  to  be  done  across  the  Hudson  River 
between  the  States  of  New  York  and  New  Jersey.  The  restraint 
extended  to  all  interstate  trade  and  commerce  in  express  packages 
between  the  States  south  of  New  Jersey  and  east  of  New  York. 
The  leaders  of  the  labor  organizations  engaged  in  the  strike  made 
no  concealment  of  their  identity  or  active  participation  in  the  re- 
straint of  interstate  trade  and  commerce.  The  violation  of  the  law 
was  open  and  notorious.  Under  the  Sherman  Anti-Trust  Law  it 
was  the  duty  of  the  United  States  district  attorneys  in  the  South- 
ern District  of  New  York  and  the  District  of  New  Jersey,  under 
the  direction  of  the  Attorney  General,  to  institute  proceedings  in 
equity  to  prevent  and  restrain  the  violation. 

No  action  was  taken  and  no  action  probably  ever  will  be  taken 
by  any  Attorney  General  or  district  attorney  in  any  similar  case 
until  the  strikers  arrive  at  the  point  where  they  violate  rights  of 
life,  liberty  or  property.  The  invocation  of  the  Sherman  Anti- 
Trust  Law  against  a  labor  organization  which  is  merely  engaged 
in  a  peaceful  and  orderly  strike  in  restraint  of  interstate  trade  and 
commerce  is  contrary  to  all  modern  ideas  of  the  rights  of  men. 

The  correctness  of  the  rule  which  will  make  the  acts  of  labor 
combinations  illegal  only  when  they  violate  rights  of  life,  liberty  or 
property  will  be  seen  from  an  examination  of  the  legal  meaning  of 
those  terms  and  a  review  of  the  purposes  of  labor  organizations  and 
the  rights  to  which  their  members  are  entitled  by  law. 

The  words  "life,  liberty  and  property"  occur  twice  in  the  Con- 
stitution of  the  United  States.  The  Fifth  Amendment  to  the  Con- 
stitution provides  that  no  person  shall  "be  deprived  of  life,  liberty 
or  property  without  due  process  of  law."  Under  the  strict  con- 
struction of  our  Federal  constitution  this  amendment  was  inter- 
preted to  mean  that  no  person  should  be  deprived  of  life,  liberty 


124  NATIONAL     BUSINESS     CONGRESS 

or  property  by  the  Federal  Government  without  due  process  of  law. 
This  interpretation  of  the  Fifth  Amendment  led  to  the  adoption 
after  the  close  of  the  Civil  war  of  a  clause  in  the  Fourteenth 
Amendment  which  provides  that  no  State  shall  "deprive  any  per- 
son of  life,  liberty  or  property  without  due  process  of  law." 

The  Constitutions  of  many  States  provide  that  no  person  shall 
be  deprived  of  life,  liberty  or  property  without  due  process  of  law 
and  enumerate  among  the  inalienable  rights  of  citizens  the  right  of 
enjoying  and  defending  life  and  liberty. 

The  presence  of  these  words  in  the  Constitution  of  the  United 
States  and  various  States  has  led  to  many  judicial  decisions  as  to 
their  meaning.  One  of  the  best  statements  of  the  comprehensive 
scope  of  their  meaning  was  given  by  the  Supreme  Court  of  Mis- 
souri : 

These  terms,  "life,  liberty  and  property"  are  representative 
terms,  and  cover  every  right  to  which  a  member  of  the  body 
politic  is  entitled  under  the  law.  Within  their  comprehensive 
scope  are  embraced  the  right  of  self  defense,  freedom  of 
speech,  religious  and  pohtical  freedom,  exemption  from  arbi- 
trary arrests,  the  right  to  buy  and  sell  as  others  may — all  our 
liberties,  personal,  civil  and  political — in  short,  all  that  makes 
life  worth  living ;  and  of  none  of  these  liberties  can  any  one  be 
deprived  except  by  due  process  of  law. 

The  broad  meaning  which  has  been  given  by  the  courts  to  the 
rights  designated  as  "life,  liberty  and  property"  makes  the  infringe- 
ment of  those  rights  a  sufficient  limitation  on  the  activity  of  com- 
binations of  labor  in  their  efforts  to  increase  wages  or  to  improve 
the  conditions  of  employment. 

The  ultimate  purpose  of  all  labor  unions  is  to  increase  the 
wages  or  improve  the  conditions  of  employment  of  their  members. 
The  immediate  object  may  be  to  secure  the  recognition  of  the 
organization,  the  discharge  of  non-union  laborers  or  the  reinstate- 
ment of  discharged  union  laborers  because  success  in  these  ends 
may  strengthen  the  union  and  improve  its  chance  of  accomplish- 
ing its  ultimate  purpose. 

Such  an  object  was  once  considered  to  be  opposed  to  public 
policy.  Labor  combinations  were  held  to  be  illegal  and  their  mem- 
bers were  liable  to  indictment  for  criminal  conspiracy.  These  de- 
cisions were  based  on  the  economic  ideas  which  shaped  and  guided 
•the  economic  policy  of  former  days.     The  public  interest  was  sup- 


NATIONAL     BUSINESS     CONGRESS  125 


posed  to  require  that  trade  should  be  protected  from  any  and  all 
restraint.  Any  combination  by  which  the  price  of  anything  was 
arbitrarily  increased,  whether  a  combination  of  masters  by  limit- 
ing production  or  of  workmen  by  compeUing  an  increase  of  wages, 
was  held  to  be  unlawful. 

These  laws  for  the  protection  of  trade  have  in  recent  years 
been  materially  modified  by  the  admission  of  exceptions.  The 
most  notable  exception  is  that  in  favor  of  labor  combinations.  This 
has  been  done  in  England  and  in  Canada  by  the  passage  of  express 
statutes.  (Criminal  Law  Amendment  Act — 34  and  35  Victoria,  Ch. 
32;  Conspiracy  and  Protection  of  Property  Act — 38  and  39  Vic- 
toria, Ch.  86;  Canada  Trades  Union  Act— 35  Victoria,  Ch.  30.)  In 
the  United  States  the  exception  of  labor  combinations  from  the  old 
rule  of  the  common  law  has  been  largely  due  to  the  action  of  the 
courts  themselves. 

So  far  as  labor  unions  are  concerned  the  Sherman  Anti-Trust 
Law  practically  inserted  in  the  Federal  jurisprudence  of  the  United 
States  the  common  law  of  England  as  it  existed  prior  to  187L  It 
is  a  distinct  step  backward  in  the  recognition  of  the  rights  of  men. 
Strikes  and  boycotts  are  the  familiar  means  which  laborers  use 
to  win  success  in  disputes  with  their  employers.  It  is  now  well 
settled  in  England  and  in  the  United  States  that  a  laborer  may 
decline  to  work  for  any  one  or  with  any  one.  The  right  of  the 
laborer  to  withhold  his  labor  is  absolute  and  not  qualified  by  the 
effect  of  the  exercise  of  this  right  upon  others.  A  striker  may  by 
persuasion  cause  employes  to  leave  the  service  of  their  employer  or 
to  dissuade  other  workmen  from  seeking  employment  with  him. 
They  may  lawfully  refuse  to  trade  with  any  person  absolutely  or 
contingently.  The  members  of  a  union  may  lawfully  refuse  to 
have  any  dealings  with  the  employer  or  with  any  person  who  deals 
with  him. 

If  one  laborer  enjoys  this  right  he  ought  not  to  lose  it  when 
acting  with  others.  The  fact  that  they  simultaneously  avail  them- 
selves of  their  right  ought  not  to  render  the  act  or  agreement 
unlawful  unless  the  manner  of  its  exercise  makes  it  so. 

The  general  recognition  of  the  lawfulness  of  these  means  is 
obscured  by  the  fact  that  they  are  so  often  accompanied  by  unlaw- 
ful acts.  The  strikers  cross  the  lawful  line  and  resort  to  violence, 
intimidation,  physical  injury  to  tangible  property  and  actual  injury 
to  that  most  valuable  form  of  intangible  property— the  good  will 


126  NATIONAL    BUSINESS    CONGRESS 

of  business.  If  a  concession  is  wrung  from  an  unwilling  employer 
by  words  or  actions  which  produce  in  his  mind  a  reasonable  fear 
of  injury  from  violence  to  his  person  or  property;  if  the  members 
of  a  labor  union  congregate  at  or  near  the  works  of  an  employer 
with  the  purpose  and  effect  of  intimidating  the  employes  of  the 
establishment;  if  by  their  acts  they  create  a  nuisance  which  annoys 
and  disturbs  an  employer  or  his  workmen  or  customers  in  the  en- 
joyment of  their  several  rights,  their  action  is  unlawful  and  those 
who  by  concert  of  action  perform  these  acts  are  guilty  of  a  criminal 
conspiracy. 

Lockouts  and  blacklists  are  the  counterparts  of  strikes  or  boy- 
cotts. Except  so  far  as  they  violate  rights  of  life,  liberty  or  prop- 
erty they  are  lawful.  The  general  principle  which  ought  to  apply 
to  all  such  cases  of  controversies  between  employers  and  employes 
is  that  no  acts  or  combinations  in  furtherance  of  such  controversies 
which  violate  rights  of  life,  liberty  or  property  are  lawful  to  either 
capital  or  labor. 

All  that  is  needed  in  Federal  legislation  so  far  as  combinations 
of  labor  in  matters  of  interstate  trade  and  commerce  are  concerned 
is  the  enactment  of  proper  remedies  for  the  enforcement  and  pro- 
tection of  these  rights.  The  remedies  must  be  practical  and  avail- 
able for  use  by  any  person  whose  interests  are  endangered.  They 
should  include : 

1.  Suits  at  law  for  damages  in  favor  of  any  person  damaged. 

2.  Suits  in  equity  for  injunctions  in  favor  of  any  person 
threatened  with  injury. 

3.  Civil  proceedings  for  injunctions  by  the  Government  to 
protect  public  interests. 

4.  Criminal  prosecutions  by  the  Government  to  punish  guilty 
parties. 

Suits  for  injunctions  and  for  damages  impose  on  private  parties 
the  duty  and  burden  of  defending  their  private  interests  and  re- 
dressing their  injuries.  These  two  remedies  at  the  instance  of 
private  parties  will  in  most  cases  accomplish  all  that  is  needed.  Any 
general  public  inconvenience  can  be  endured  up  to  a  point  where 
the  Federal  Government  will  take  the  initiative  to  enjoin  a  con- 
tinuance of  the  public  injury  or  to  punish  the  offenders  by  criminal 
prosecution. 


NATIONAL     BUSINESS     CONGRESS  127 

Under  modern  conditions  of  industry  this  limitation  is  not  suf- 
ficient in  reference  to  combinations  of  capital.  It  is  for  this  rea- 
son that  an  injury  to  trade  or  commerce  has  been  made  an  addi- 
tional test  of  the  legality  of  a  combination  of  capital. 

RULE   FOR   COMBINATIONS    OF   CAPITAL. 

The  entire  judicial  and  economical  history  of  England  has 
been  a  continuous  struggle  to  suppress  monopolies,  prevent  re- 
straints of  trade  and  maintain  competition.  The  language  of  this 
heritage  of  struggle  is  so  firmly  imbedded  in  the  minds  of  all  men 
that  we  continue  to  use  the  same  phrases  after  we  have  ceased  to 
deal  with  the  same  subjects.  These  phrases  are  "monopoly,"  "re- 
straint of  trade,"  "suppression  of  competition"  and  "contrary  to 
public  policy." 

Alonopoly  in  a  strict  sense  is  an  exclusive  right  or  privilege 
granted  by  the  state.  The  principal  modern  monopolies  of  this 
class  are  patents,  copyrights  and  the  right  of  eminent  domain.  In 
a  modern  sense  monopoly  has  come  to  mean  the  sole  control  of  the 
supply  and  sale  of  any  article,  no  matter  how  acquired.  Under 
modern  conditions  of  industry  and  modern  means  of  transporta- 
tion and  transmission  of  information  no  such  monopoly  is  possible 
without  the  protection  of  the  Government  in  a  form  of  a  concession, 
patent,  copyright  or  tariff. 

Restraint  of  trade  and  suppression  of  competition  have  become 
practically  synonymous  terms.  The  maintenance  of  competition  has 
been  the  battle  cry  of  all  persons  seeking  to  secure  a  more  equal 
distribution  of  the  results  of  labor  among  the  people  who  con- 
tribute to  the  production  of  wealth. 

No  modern  discussion  of  anti-trust  legislation  proceeds  very 
far  until  we  find  that  we  are  not  praising  the  merits  of  competition, 
but  are  denouncing  its  demerits;  not  formulating  plans  to  prevent 
restraints  of  trade,  but  proposing  restrictions  on  trade ;  not  seeking 
to  suppress  monopolies,  but  to  create  and  control  them. 

The  cheers  and  hisses  are  equal  in  volume.  Denunciations  of 
"monopoly"  and  "restraint  of  trade"  are  drowned  at  intervals  by 
the  clamorous  voices  of  the  victims  of  "unfair"  and  "reckless"  and 
"ruinous"  competition.  These  victims  of  competition  have  as  great 
need  for  protection  against  the  crimes  of  competition  as  the  victims 
of  restraint  of  trade  have  against  the  crimes  of  monopoly.  They 
seek  the  protection  of  a  Federal  Anti-Trust  Law  which  shall  clearly 


128  N  A  T  I  O  NAL    BUSINESS     CONGRESS 

define  what  acts  and  things  are  injurious  to  trade  or  commerce 
under  modern  conditions  of  industry. 

This  protection  is  not  afforded  by  the  Sherman  Anti-Trust 
Law.  To  what  extent  it  was  afforded  by  the  common  law  of  Eng- 
land is  a  question  as  to  which  opinions  may  differ. 

In  its  decision  in  the  Standard  Oil  case  the  Supreme  Court 
reviewed  the  history  of  the  common  law  and  statutes  of  England  in 
reference  to  monopolies  and  restraints  of  trade  and  stated  its  con- 
clusions in  the  following  language : 

From  the  review  just  made  it  clearly  results  that  outside 
of  the  restrictions  resulting  from  the  want  of  power  in  an  in- 
dividual to  voluntarily  and  unreasonably  restrain  his  right  to 
carry  on  his  trade  or  business  and  outside  of  the  zuaiit  of  right 
to  restrain  the  free  course  of  trade  by  contracts  or  acts  ivhich 
implied  a  wrongful  purpose,  freedom  to  contract  and  to  abstain 
from  contracting  and  to  exercise  every  reasonable  right  inci- 
dent thereto  became  the  rule  in  the  English  law. 

In  the  decision  of  many  cases  originating  in  diverse  circum- 
stances and  presenting  different  phases  the  interpretation  of  the 
common  law  presents  many  apparent  inconsistencies.  But  the  guid- 
ing principle  of  the  common  law  was  sound — it  refused  to  enforce 
contracts  or  agreements  in  restraint  of  trade  which  implied  a  wrong- 
ful purpose — an  injury  to  the  public. 

This  brings  us  back  to  the  starting  point.  It  is  a  question  of 
choice  between  adherence  to  the  rule  of  competition  or  the  accept- 
ance of  the  principle  of  co-operation  and  union  in  trade  and  com- 
merce. If  the  people  are  going  to  adhere  to  the  prohibition  of  all 
restraints  of  competition  as  the  rule  of  American  trade  and  com- 
merce the  Sherman  Anti-Trust  Lazv  accomplishes  that  purpose.  If 
they  are  going  to  accept  the  doctrines  of  union  and  co-operation  as 
beneficial  forces  in  trade  and  commerce  an  amendment  of  the  Sher- 
man Anti-Trust  Lazv  zvhich  shall  definitely  declare  these  principles 
to  be  its  basis  and  define  zvhat  acts  and  things  are  in  znolation  of 
these  principles  is  imperatively  necessary. 

Many  remedies  are  proposed  as  a  solution  of  all  the  difficulties 
of  the  situation.  Those  most  prominently  presented  are  the  estab- 
lishment of  an  Interstate  Industrial  Commission ;  the  national  in- 
corporation of  companies  engaged  in  interstate  trade  and  commerce ; 
the  prohibition  of  holding  companies  and  interlocking  directorates. 


NATIONAL     BUSINESS     CONGRESS  129 

INTERSTATE  INDUSTRIAL  COMMISSION. 

There  is  a  popular  belief  in  the  infallibility  of  government  by 
commission.  In  any  jiolitical  emergency  a  prompt  suggestion  is 
made  to  establish  a  commission  to  solve  all  questions.  The  argu- 
ment is  made  that  the  enforcement  of  the  law  is  an  administrative 
matter  and  that  it  is  necessary  to  have  a  commission  whose  true 
function  is  that  of  administration. 

-  The  mind  is  often  captivated  by  a  catchword.  The  word  "ad- 
ministration" plays  the  role  of  catchword  in  the  present  discussion. 
The  statesmen  who  drew  the  Federal  Constitution  and  planned  the 
Federal  svstem  were  not  amateurs  in  political  science.  They  ana- 
Ivzed  the  functions  of  government  and  separated  them  into  legis- 
lative, executive  and  judicial.  The  system  was  copied  and  adopted 
bv  practically  all  the  States.  The  separation  of  these  three  func- 
tions became  a  fundamental  principle  of  all  Republican  govern- 
ments. The  modern  tendency  in  the  United  States  is  to  merge  the 
executive  and  judicial  functions  in  a  commission  and  call  it  an  "ad- 
ministrative body."  Every  administrative  commission  is  merely  a 
board  for  the  combined  exercise  of  both  judicial  and  executive 
functions.  It  is  not  germane  to  the  purposes  of  this  argument  to 
discuss  the  merits  of  this  merger  of  the  executive  and  judicial 
functions.  The  practical  question  in  reference  to  the  anti-trust  situ- 
ation is  whether  the  people  wnsh  to  have  an  Industrial  Commission 
clothed  not  only  with  executive  and  judicial  functions,  but  also 
witli  legislative  power. 

The  foremost  advocate  of  an  Industrial  Commission  is  former 
President  Theodore  Roosevelt,  who  has  recently  restated  his  posi- 
tion in  the  following  language : 

What  is  needed  is  the  creation  of  a  Federal  administrative 
body  with  full  power  to  do  for  ordinary  interstate  industrial 
business  carried  on  on  a  large  scale  w-hat  the  Interstate  Com- 
merce Commission  now  does  for  interstate  transportation  busi- 
ness.    (Outlook.  November  25,  1911.) 

Prominent  among  the  supporters  of  this  project  are  Elbert  II. 
Gary,  George  W.  Perkins.  Samuel  Untermyer  and  Seth  Low,  Presi- 
dent of  the  National  Civic  Federation. 

This  project  of  administrative  control  over  interstate  trade  and 
comme-rc-e  has  already  been  before  Congress.  In  March,  1908, 
President  Roosevelt  in  a  special  message  to  Congress  suggested  that 
the  substantive  law  should  remain  as  at  present,  but  that  any  person 


130  NATIONAL     BUSINESS     CONGRESS 

desiring  to  make  a  contract  in  restraint  of  trade  should  file  the  pro- 
posed contract  with  the  Bureau  of  Corporations  or  other  appro- 
priate executive  body.  The  executive  department  would  have  sixty 
days  within  which  to  forbid  the  contract.  If  the  contract  were 
forbidden  it  would  then  become  subject  to  the  provisions  of  the 
Anti-Trust  law  if  it  were  at  all  in  restraint  of  trade.  If  it  were 
not  prohibited  it  would  then  only  be  liable  to  attack  on  the  ground 
that  it  constituted  an  unreasonable  restraint  of  trade. 

Judge  Elbert  H.  Gary,  Chairman  of  the  Board  of  Directors  of 
the  United  States  Steel  Corporation,  Mr.  Francis  Lynde  Stetson, 
chief  counsel  for  IMessrs.  J.  P.  ]\Iorgan  &  Co.,  and  Mr.  Victor 
]\Iorawetz  prepared  for  the  National  Civic  Federation  a  bill  em- 
bodying substantially  the  recommendations  of  the  President.  The 
Judiciary  Committee  of  the  Senate  made  an  adverse  report  on  this 
bill  in  which  it  said : 

The  result  is  that,  technically  as  to  criminal  prosecutions 
and  practically  as  to  civil  prosecutions,  a  dispensing  power,  a 
power  of  granting  immunity,  is,  in  the  one  case,  conferred  on 
a  mere  bureau  head,  and  in  the  other  case  on  an  administra- 
tive body,  and  in  both  cases  without  notice  or  hearing  and 
wholly  ex  parte — a  course  of  procedure  that  would  not  be  tol- 
erated in  any  court  of  our  country. 

It  is  easily  comprehensible  that  the  representatives  of  "big 
business"  should  be  w-illing  to  have  at  Washington  an  Industrial 
Commission  with  power  to  grant  indulgences  and  absolutions.  Mr. 
Gary  and  Mr.  Frick  have  demonstrated  their  ability  to  make  a  mid- 
night trip  to  Washington  and  before  noon  of  the  next  day  to  get 
from  the  President  and  the  Attorney-General  a  practical  promise 
of  immunity  from  interference  in  the  acquisition  of  their  most 
important  competitor  at  a  time  of  financial  panic  when  the  prop- 
erty was  not  otherwise  salable. 

The  serious  question  is  where  w-ill  the  man  of  small  business — 
"the  little  fellow"— be  under  the  rule  of  an  Industrial  Commission  ? 
How  will  it  promote  his  prospects  of  success  to  have  the  conduct 
of  his  business  continually  "administered"  at  Washington?  Is  the 
margin  of  profit  in  a  small  business  sufficient  to  bear  the  expense 
of  maintaining  or  sending  a  legal  or  commercial  representative  to 
Washington  at  all  times  to  see  that  the  decisions  of  the  administra- 
tive board  are  just  and  satisfactory.  Evidently  not.  The  pro- 
moters of  the  idea  themselves  limit  it  to  enterprises  which  do  busi- 


NATIONAL     BUSINESS     CONGRESS  131 

ness  "on  a  large  scale."  This  separation  of  "big  business"  is  more 
ingenious  than  generous,  more  plausible  than  sound.  The  probable 
and  practical  result  will  be  that  "big  business"  will  secure  immunity 
from  the  strict  enforcement  of  restrictive  and  prohibitive  laws 
to  which  "small  business"  will  be  subject. 

"Small  business"  must  not  be  misled  by  the  analogy  of  the 
Interstate  Commerce  Commission  in  transportation.  The  problems 
confronting  the  Interstate  Commerce  Commission  were  of  a  con- 
crete character  and  limited  in  number — reasonable  rates,  rebates,  dis- 
criminations, undue  preferences,  equal  facilities,  long  and  short 
hauls,  continuous  carriage  and  publicity  of  tariffs.  All  these  prob- 
lems were  defined  and  the  corresponding  prohibitions  stated  in  the 
law  establishing  the  Interstate  Commerce  Commission. 

Unless  Congress  proposes  to  delegate  to  an  Industrial  Com- 
mission the  power  to  legislate  there  is  nothing  for  an  administra- 
tive Industrial  Commission  to  do  until  the  law  has  definitely  defined 
what  men  engaged  in  interstate  trade  and  commerce  may  lawfully 
do  and  what  they  may  not  do.  The  members  of  the  Industrial 
Commission  must  either  exercise  their  own  opinion  as  to  what  the 
law  ought  to  be  or  have  a  definite  law  to  guide  them  in  the  per- 
formance of  their  administrative  duties. 

In  the  American  Tobacco  case  the  Supreme  Court  practically 
designated  the  judges  of  the  United  States  Circuit  Court  for  the 
Southern  District  of  New  York  as  an  Industrial  Commission  to 
reassemble  the  parts  of  that  great  combination  in  a  manner  in  con- 
formity to  the  law.  If  any  of  the  parties  directly  or  indirectly 
interested  were  satisfied  with  the  work  of  the  United  States  Circuit 
Court  for  the  Southern  District  of  New  York  while  sitting  as  an 
Industrial  Commission  for  the  reconstitution  of  the  component 
parts  of  the  American  Tobacco  Company  their  satisfaction  has  not 
received  proper  notice  in  the  public  press.  It  is  doubtful  whether 
any  President  will  ever  secure  four  men  better  qualified  to  become 
members  of  an  Industrial  Commission  than  the  four  judges  of  the 
United  States  Circuit  Court  for  the  Southern  District  of  New  York. 
Any  criticism  of  their  work  must  be  laid  to  the  indefiniteness  of 
the  law  they  were  trying  to  "administer." 

There  may  be  good  and  sufficient  reasons  why  the  establishment 
of  an  Industrial  Commission  will  make  the  interpretation  and  en- 
forcement of  a  good  law  more  uniform  and  practical.  But  these 
benefits  cannot  be  derived  from  an  Industrial  Commission  or  until 
the  Commission  has  a  good  lazv. 


132  NATIONAL     BUSINESS     CONGRESS 


NATIONAL  INCORPORATION    LAW. 

The  national  incorporation  or  registration  of  companies  en- 
gaged in  interstate  trade  and  commerce  is  proposed  as  a  means  of 
solving  industrial  problems.  The  foremost  advocate  of  a  Federal 
Incorporation  Law  is  President  Taft.  In  a  special  message  to  Con- 
gress on  January  7.  1910,  he  proposed  such  a  law  and  has  renewed 
his  recommendation  for  its  passage  in  his  annual  message  on 
December  5,  1911.  The  plan  has  advantages  and  there  appear  to 
be  no  good  reasons  why  a  law  permitting  national  incorporation 
or  registration  of  companies  engaged  in  interstate  trade  and  com- 
merce should  not  be  passed.  The  law  will  probably  have  to  be 
made  permissive  in  order  to  overcome  the  opposition  of  the  States. 

The  enactment  of  a  law  merely  for  the  national  incorporation 
or  registration  of  corporations  will  not  solve  any  industrial  prob- 
lems. When  the  companies  have  been  incorporated  or  registered 
and  received  their  license  to  engage  in  interstate  trade  and  com- 
merce they  must  know  the  law  and  obey  it,  unless  they  are  to  be 
licensed  to  disobey  the  law.  The  same  question  recurs  continually 
for  definition  and  decision.  What  can  corporations  lawfully  do 
and  not  do?  When  that  definition  has  been  made  the  question 
whether  those  acts  are  done  by  a  corporation  organized  under  the 
Federal  law  or  under  the  laws  of  any  State  is  a  minor  matter.  They 
must  conform  equally  to  the  requirements  and  prohibitions  of  the 
Federal  law  in  so  far  as  interstate  trade  and  commerce  are  con- 
cerned. 

//  the  od-rocatcs  of  an  Industrial  Conmiission  a)id  Xatioiial 
Incorporation  icould  turn  their  attention  from  the  construction  of 
the  machinery  for  the  administration  of  the  laiv  to  the  construction 
of  the  lazv  they  woidd  make  more  progress  in  clearing  the  clouds 
from  business. 

Haste  makes  waste.  Congress  can  start  with  the  adoption  of 
a  simple  law  prohibiting  only  those  acts  and  things  which  are  cer- 
tainly injurious  to  trade  and  commerce.  The  Department  of  Com- 
merce and  Labor  can  be  equipped  with  men  and  money  to  enable  it 
to  ascertain  by  investigation  what  further  practices  ought  to  be 
declared  by  statute  to  be  injurious  to  trade  and  commerce.  When 
its  recommendations  have  been  submitted  to  Congress  from  time 
to  time  a  law  ought  to  be  evolved  which  should  not  require  con- 
tinual administration  nor  continual  interpretation,  but  merely  con- 


NATIONAL     BUSINESS     CONGRESS  133 

tinual  enforcement  l)y  the  usual  and  ordinarN-  methods  of  the 
enforcement  of  any  other  law. 

The  great  majority  of  business  men  leill  prefer  to  give  con- 
tinual obedience  to  a  law  they  understand  rather  than  be  subject  to 
tJie  continual  ad)ninistration  of  a  law  they  do  not  undcrsta)id. 

The  principal  concrete  suggestions  in  the  direction  of  precise 
dehnitions  oi  unlawful  acts  and  things  are  the  prohihition  of  hold- 
ing companies  and  interlocking  directorates. 

PROHIBITION    OF   HOLDING   COMPANIES. 

The  prohibition  of  holding  companies  will  have  at  least  one 
very  simple  advantage.  It  will  tend  to  prevent  the  centralized  con- 
trol of  allied  industries.  It  will  prevent  the  permanent  control  of 
a  string  of  important  enterprises  by  a  small  number  of  men  whose 
entire  investment  is  only  a  small  percentage  of  the  total  capitaliza- 
tion of  the  combined  industry.  In  many  instances  the  real  con- 
trol may  be  held  by  men  owning  a  bare  majority  of  the  stock  of 
one  company  whose  assets  are  used  to  acquire  control  of  one  or 
more  additional  companies  whose  combined  assets  are  in  turn  used 
in  the  same  manner  for  the  acquisition  of  control  over  other  com- 
panies. The  prohibition  of  this  form  of  control  will  accomplish 
much  in  preventing  the  concentration  of  trade  and  commerce  in  the 
hands  of  a  few  men. 

An  unqualified  prohibition  of  any  corporation  engaged  in  inter- 
state trade  and  commerce  from  holding  stock  in  another  will  not 
be  entirely  feasible  under  our  system  of  States'  rights.  It  will  open 
wide  the  door  to  discrimination  by  States  in  favor  of  domestic 
corporations  and  against  foreign  corporations.  Corporations  of 
other  States  are  not  "citizens"  within  the  meaning  of  the  Constitu- 
tional clause  which  provides  that  "the  citizens  of  each  State  shall 
be  entitled  to  all  the  privileges  and  immunities  of  citizens  of  the 
several  States."  Each  State  may  discriminate  in  favor  of  its  own 
corporations  and  against  those  chartered  by  another  State.  It  was 
to  prevent  such  discrimination  as  to  individuals  that  the  control 
of  interstate  trade  and  commerce  was  given  to  the  Federal  govern- 
ment. The  absolute  denial  of  the  right  of  a  corporation  engaged 
in  interstate  trade  and  commerce  to  hold  stock  in  another  company 
would  make  it  easier  for  one  State  to  discriminate  in  favor  of  a 
domestic  corporation  against  the  lousiness  of  a  company  organized 
in  another  State. 


134  NATIONAL     BUSINESS     CONGRESS 


The  devcIoi)incnt  of  an  iiulustry  may  be  greatly  promoted  by 
allowing  the  parent  company  to  organize  subsidiary  companies 
either  for  the  purpose  of  doing  particular  branches  of  its  business 
or  for  the  purpose  of  doing  its  business  in  a  particular  State  or  in  a 
particular  foreign  country.  A  proper  line  may  be  drawn  by  pro- 
viding that  no  corporation  engaged  in  interstate  trade  or  commerce 
may  own  or  hold  stock  in  another  company  unless  the  parent  com- 
pany owns  all  of  the  stock  of  the  subsidiary  company  except  the 
minimum  amount  necessary  to  qualify  incorporators  and  directors 
in  the  State  or  foreign  country  where  the  subsidiary  company  is 
organized  or  proposes  to  do  business.  To  this  provision  may  be 
added  the  requirement  that  a  majority  of  the  directors  of  the  sub- 
sidiary companies  must  be  directors  in  the  parent  company,  and 
that  the  identity  of  the  subsidiary  companies  as  a  part  of  the  parent 
company   must  be  made  a  matter  of  public  record. 

PROHIBITION    OF    INTERLOCKING    DIRECTORATES. 

Another  means  of  checking 'the  concentrated  control  of  indus- 
tries is  the  prohibition  of  interlocking  directors  in  companies  which 
have  business  relations  with  each  other  of  a  character  which  ought 
to  call  for  antagonistic  or  at  least  independent  judgment. 

The  control  of  banking  and  transportation  ought  to  be  sepa- 
rated as  far  as  possible  from  the  control  of  industrial  enterprises, 
the  success  of  which  must  be  dependent  on  them  for  fair  and  equal 
treatment  in  the  matter  of  transportation  and  loans.  The  principle 
of  this  separation  has  been  recognized  in  the  "commodity  clause" 
of  the  Act  of  June  29,  1906,  which  prohibits  the  transportation  by 
the  railroads  of  the  products  of  industries  owned  by  them.  This 
principle  ought  to  be  extended  to  prohibit  directors  and  officers  of 
railroads  from  being  directors  and  ofificers  of  industrial  companies 
w'hich  are  or  may  be  customers  for  transportation. 

The  necessity  for  a  similar  separation  of  the  direction  of  bank- 
ing and  industry  is  shown  in  the  attacks  upon  that  indefinable  thing 
called  the  "Money  Trust." 

THE   MONEY  TRUST. 

The  argument  against  trusts  is  very  apt  to  degenerate  into  a 
heated  tirade  against  the  "Money  Trust."  The  bankers  are  in 
popular  imagination  the  men  responsible  for  all  the  evils  in  trade 
and  commerce  to  which  other  mortals  are  subject.     The  men  who 


NATIONAL     BUSINESS     CONGRESS  135 

compose  the  '"Money  Trust"  are  the  men  who  are  entrusted  with 
the  loaning  and  investing  of  the  savings  of  the  people.  So  far  as 
they  can  the  people  entrust  the  loaning  and  investing  of  their  sav- 
ings to  the  men  who  do  not  lose  it  or  steal  it.  The  custodians  of 
the  savings  of  the  people  always  have  had  and  always  will  have 
all  the  power  that  the  ''Money  Trust"  is  now  accused  of  exercising. 
There  never  has  been  and  never  will  be  any  escape  from  their  in- 
dustrial and  commercial  power  unless  the  government  takes  from 
the  people  who  economize  and  save  the  right  to  select  the  agents 
and  custodians  of  their  funds. 

Their  power  and  influence  has  been  increased  by  the  super- 
vision to  which  their  control  of  the  funds  has  been  subjected. 
Supervision  increases  the  size  of  the  strong  financial  institutions 
and  eliminates  the  weak  ones.  This  supervision  has  been  directed 
primarily  to  preventing  the  managers  of  financial  institutions  from 
stealing  or  losing  the  funds  entrusted  to  their  care.  It  ought  to 
be  extended  to  preventing  their  using  them  to  promote  and  develop 
industries  in  which  they  are  interested  and  hinder  and  destroy 
their  rivals. 

The  functions  of  bankers  and  the  functions  of  merchants  and 
manufacturers  ought  to  be  kept  separate  as  far  as  possible.  The 
most  efficient  method  of  maintaining  this  separation  of  functions  is 
to  provide  that  no  loans  shall  be  made  directly  or  indirectly  by  any 
National  Bank  to  any  ofificer  or  director.  The  funds  of  the  banks 
should  be  always  available  to  customers  who  borrow  on  the  merit 
of  their  security  and  not  to  insiders  who  borrow  on  the  basis  of 
their  influence. 

CONCLUSION. 

ff'r  slioiild  be  much  nearer  a  solution  of  the  real  evils  of  our 
industrial  de:'clopine]it  if  Congress  zcould  first  take  as  the  foun- 
dation of  its  Anti-Trust  legislation  the  protection  of  the  rights  of 
life,  liberty  and  property  with  such  supplemental  definitions  of  acts 
injurious  to  trade  or  commerce  as  the  conditions  of  modern  indus- 
try make  necessary  or  desirable,  and  then  provide  the  machinery  for 
its  enforcement. 

'Mr.  President  and  Gentlemen :  I  ha\-e  drafted  and  printed  at 
the  end  of  this  pamphlet  what  I  have  called  a  Federal  Anti-Trust 
Act.  -  T  am  not  conceited  enough  to  suppose,  even  from  my  point 
of  view,  that  I  have  arrived  at  the  final  word  of  wisdom  in  regard 


136  NATIONAL    BUSINESS    CONGRESS 


to  tlic  terms  of  that  law.  but  I  do  believe  that  the  broad  lines  upon 
which  it  is  drawn  would  furnish  a  very  much  better  foundation  for 
sound  and  sensible  legislation  on  the  subject  than  the  present  recom- 
mendations from  labor  and  capital.  If  it  is  not  asking  too  much 
of  your  time  and  patience.  I  should  be  glad  to  have  every  business 
man  read  that  proposed  law,  even  if  he  docs  not  spend  any  time 
reading  the  expression  of  my  opinion  as  to  the  method  by  which 
I  arrived  at  it ;  and  I  shall  only  hope  that,  as  a  return  for  the  great 
attention  and  courtesy  that  has  been  paid  to  me  here,  the  work  I 
have  done  will  be  of  some  value  to  the  deliberations  of  this  organi- 
zation.    (Applause.) 

PROPOSED  FEDERAL  ANTI-TRUST  LAW. 

An  Act  to  Promote  Trade  and  Commerce. 


Bv  Mr.  Pavey. 


Be  it  enacted  by  the  Senate  and  House  of  Representatives  of 
the  United  States  of  America  in  Congress  assembled. 

Section  1.  xA.ll  organizations,  associations,  combinations  and 
agreements  in  matters  of  trade  and  commerce  between  the  states 
and  territories  of  the  United  States  and  the  District  of  Columbia 
and  with  foreign  nations,  the  purpose  and  effect  of  which  are  to 
increase  the  wages  and  improve  the  conditions  of  employment  of 
labor  are  lawful,  unless  they  violate  rights  of  life,  liberty  and 
property. 

Sec.  2.  All  organizations,  associations,  combinations  and 
agreements  in  matters  of  trade  and  commerce  between  the  states 
and  territories  of  the  United  States  and  the  District  of  Columbia 
and  with  foreign  nations,  the  purpose  and  effect  of  which  are  to 
regulate  competition,  improve  the  conditions  of  business  and  in- 
crease the  profits  of  capital,  are  lawful  unless  they  violate  rights 
of  life,  liberty  or  property  or  injure  trade  or  commerce. 

Sec.  3.  Every  act  and  thing  prohibited  by  this  section,  shall 
be  deemed  an  injury  to  trade  or  commerce  between  the  states  and 
territories  of  the  United  States  and  the  District  of  Columbia  and 
with  foreign  nations  within  the  meaning  of  this  act. 

(a)  After  the  expiration  of  one  year  from  the  passage  of  this 
act.  no  corporation,  joint  stock  association  or  partnership  engaged 


NATIONAL     BUSINESS     CONGRESS  137 

in  trade  or  commerce  l^etween  tlie  several  states  and  territories  of 
the  United  States  and  the  District  of  Columbia  or  with  foreign 
nations  shall  own  or  hold  stock  or  shares  in  any  other  corporation, 
joint  stock  association  or  partnership,  engaged  in  such  trade  or 
commerce,  except  that  any  such  corporation,  joint  stock  association 
or  partnership  may  acquire  or  organize  a  subsidiary  corporation, 
joint  stock  association  or  partnershij)  in  any  state  or  territory  of  the 
United  States  or  the  District  of  Columbia  or  any  foreign  country  in 
order  to  avoid  a  ctintlict  of  laws  or  escape  double  taxation,  or  have 
the  right  to  do  business  or  accjuire  property  within  such  state  or 
territory.  District  of  Columbia  or  foreign  country ;  provided  that 
all  the  stock  or  shares  of  the  subsidiary  corporation,  joint  stock 
association  or  partnership,  except  so  much  as  may  be  required  by 
the  law  of  the  state  or  territory  or  foreign  countrv  where  such 
subsidiary  company  is  organized  to  qualify  directors  and  officers, 
shall  be  owned  and  held  by  the  parent  company,  joint  stock  associa- 
tion or  partnership  and  a  majority  of  the  directors  of  the  subsidiary 
company  shall  be  directors  of  the  parent  company,  and  provided, 
further,  that  every  such  parent  company  shall  tile  a  statement  in  the 
office  of  the  Bureau  of  Corporations,  in  the  Department  of  Com- 
merce and  Labor  at  Washington,  stating  in  detail,  the  reasons  why 
such  subsidiary  company  has  been  acquired  or  organized ;  the  names 
of  the  persons  holding  stock  or  shares  in  such  subsidiarv  company, 
and  the  amounts  held  by  each;  together  with  the  names  of  the 
directors  of  the  parent  company  and  of  the  subsidiary  company; 
and,  provided  further,  that  the  names  of  the  parent  company  and 
the  subsidiary  company  shall  appear  on  all  letter  heads,  bill  heads 
and  invoices  of  both  companies. 

(b)  After  the  expiration  of  one  year  from  the  passage  of  this 
act.  no  person  who  is  an  officer  or  director  of  any  railwav  com- 
pany or  other  corporation,  joint  stock  association  or  partnership 
which  is  engaged  in  business  as  a  common  carrier  in  trade  and  com- 
merce between  the  states  and  territories  of  the  United  States  and 
the  District  of  Columbia  and  with  foreign  nations,  shall  at  the 
same  time  be  an  agent,  manager.  ])artner.  officer  or  director  of  any 
industrial  or  C(jmmercial  corporation,  joint  stock  association  or 
partnershi])  engaged  in  such  trade  or  commerce. 

(e)  After  the  expiration  of  one  year  ivam  the  passage  of  this 
act,  no- person  shall  be  at  the  same  time  an  officer  or  director  of 
more  than  one  National  Bank  in  any  one  city  of  the  United  States. 


138  NATIONAL    BUSINESS     CONGRESS 

No  loans  sliall  be  made  by  any  National  Bank,  directly  or  indirectly, 
to  any  officer  or  director  of  sucb  bank.  No  National  Bank  sball 
purcbase  or  acquire  in  any  otber  manner  than  in  payment  of  a  debt, 
any  securities  in  excess  of  10%  of  the  capital  stock  of  the  bank. 

(d)  After  the  expiration  of  one  year  from  the  passage  of  this 
act,  no  corporation  shall  engage  in  trade  or  commerce  between  the 
states  and  territories  of  the  United  States  and  the  District  of 
Columbia  and  with  foreign  nations,  if  the  shares  of  its  capital  stock, 
or  any  part  thereof,  are  held  in  a  voting  trust. 

(c)  After  the  expiration  of  one  year  from  the  passage  of  this 
act,  no  corporation  shall  engage  in  trade  or  commerce  between 
the  states  and  territories  of  the  United  States  and  the  District  of 
Columbia  and  with  foreign  nations,  if  the  stockholders  are  not  en- 
titled at  each  election  of  directors  to  as  many  cumulative  votes  for 
one  or  more  directors  of  the  corporation  as  equals  the  number  of 
shares  held  by  them  multiplied  by  the  number  of  directors  to  be 
elected. 

(/)  After  the  expiration  of  one  year  from  the  passage  of  this 
act,  no  corporation  engaged  in  trade  or  commerce  between  the 
states  and  territories  of  the  United  States  and  the  District  of 
Columbia  and  with  foreign  nations,  shall  have  in  its  business  within 
the  United  States  the  same  clerical  organization,  keep  the  same 
office  or  offices,  retain  or  employ  the  same  agent  or  agents  for  the 
purchase  of  its  materials  or  the  sale  of  its  products  or  have  the 
same  officers  or  directors  as  any  other  corporation  engaged  in  whole 
or  in  part  in  the  same  business. 

(g)  After  the  expiration  of  one  year  from  the  passage  of  tliis 
act,  no  corporation  engaged  in  trade  or  commerce  between  the 
states  and  territories  of  the  United  States  and  the  District  of 
Columbia,  and  with  foreign  nations,  shall  do  business,  directly  or 
indirectly,  under  any  other  name  than  its  own  corporate  name  or 
the  name  of  a  subsidiary  controlled  by  it,  and  the  products  of  the 
subsidiary  corporation,  which  are  sold  in  the  United  States  and  bear 
the  name  of  the  subsidiary  company,  shall  also  bear  a  statement 
indicating  the  fact  of  such  control. 

Sec.  4.  Every  person  who,  alone  or  in  combination  with 
others,  does  or  causes  to  be  done,  any  act  or  thing  in  matters  of 
trade  or  commerce  between  the  states  and  territories  of  the  United 
States  and  the  District  of  Columbia,  and  with  foreign  nations, 
which  violates  any  rights  of  life,   liberty  or  property,  or  injures 


NATIONAL    BUSINESS     CONGRESS  139 


trade  or  commerce,  or  who  does  or  causes  to  be  done  any  act  or 
thing  prohibited  by  this  act,  shall  be  deemed  guilty  of  a  misde- 
meanor, and  on  conviction  thereof,  shall  be  punished  by  a  fine  not 
exceeding  five  thousand  dollars  or  by  imprisonment,  not  exceeding 
one  year,  or  by  both  said  punishments  in  the  discretion  of  the  court. 

Sec.  5.  The  several  circuit  courts  of  the  United  States  are 
hereby  invested  with  jurisdiction  to  prevent  and  restrain  violations 
of  this  act ;  and  it  shall  be  the  duty  of  the  several  district  attorneys 
of  the  United  States,  in  their  respective  districts,  under  the  direc- 
tion of  the  Attorney  General,  to  institute  proceedings  in  equity  to 
prevent  and  restrain  such  violations.  Any  one  or  more  persons 
iiia\  institute  proceedings  in  equity  to  prevent  and  restrain  such 
violations.  Such  proceedings  may  be  by  way  of  petition,  setting 
forth  the  cause  and  praying  that  such  violation  shall  be  enjoined  or 
otherwise  prohibited.  When  the  parties  complained  of  shall  have 
been  duly  notified  of  such  petition,  the  court  shall  proceed  as  soon 
as  may  be  to  the  hearing  and  determination  of  the  case ;  and  pend- 
ing such  petition,  and  before  a  final  decree,  the  court  may,  at  any 
time,  make  such  temporary  restraining  order  or  prohibition  as  shall 
be  deemed  just  in  the  premises. 

Sec.  6.  Whenever  it  shall  appear  to  the  court  before  which 
the  proceedings  under  Section  5  of  this  act  may  be  pending,  that  the 
ends  of  justice  require  that  other  parties  should  be  brought  before 
the  court,  the  court  may  cause  them  to  be  summoned,  whether  they 
reside  in  the  district  in  which  the  court  is  held  or  not;  and  sub- 
poenas to  that  end  may  be  served  in  any  district  by  the  marshal 
thereof. 

Sec.  7.  Any  person  who  shall  be  injured  in  his  business  or 
property  by  any  other  person  by  reason  of  anything  forbidden  or 
declared  to  be  unlawful  by  this  act,  may  sue  therefor  in  any  cir- 
cuit court  of  the  United  States  in  the  district  in  which  the  defend- 
ant resides  or  is  found,  without  respect  to  the  amount  in  contro- 
versy, and  shall  recover  three-fold  the  damages  by  him  sustained 
and  the  costs  of  the  suit,  including  a  reasonable  attorney's  fee. 

Sec.  8.  Whenever  in  any  civil  or  criminal  suit  or  proceeding 
brought  by  the  United  States  under  the  provisions  of  this  Act,  a 
final  judgment  or  decree  shall  have  been  rendered  to  the  effect  that 
any  person  has  done,  or  caused  to  be  done,  any  act  or  thing  in  viola- 
tion of  the  provisions  of  this  Act,  the  existence  of  such  act  or  thing 
shall,  to  the  full  extent  to  which  the  issues  of  fact  or  law  were  liti- 


140  NATIONAL     BUSINESS     CONGRESS 

gated,  and  to  the  full  extent  to  which  such  judgment  or  decree  would 
constitute  in  any  other  proceeding  an  estoppel  as  between  the  United 
States  and  such  person,  constitute  as  against  such  person  conclusive 
evidence  of  the  same  facts  and  be  conclusive  as  to  the  same  issvies  of 
law  in  favor  of  any  other  jxirty  in  any  other  proceeding  brought 
under  the  provisions  of  this  Act. 

Sec.  9.  In  any  civil  proceeding  begun  ])ursuant  to  the  pro- 
visions of  this  Act  by  the  United  States  in  which  a  judgment  or 
decree,  interlocutory  or  final,  shall  have  been  entered  to  the  effect 
that  any  defendant  has  done,  or  caused  to  be  done,  any  act  or  thing 
prohibited  by  this  Act.  any  person  claiming  to  have  been  injured  by 
anv  such  act  or  thing,  shall  be  admitted  on  intervening  petition  to 
the  suit  to  establish  such  injury  and  the  damages  resulting  there- 
from, and  may  have  judgment  and  execution  therefor,  or  any  other 
relief  to  the  same  extent  as  if  an  independent  suit  had  been  brought 
by  such  person  pursuant  to  the  provisions  of  this  Act.  Such  inter- 
vening petition,  or  independent  suit,  shall  not  be  barred  by  lapse  of 
time  if  begun  within  one  year  after  the  entry  of  a  final  decree  or 
judgment,  either  in  a  civil  or  criminal  proceeding  brought  by  the 
Government  establishing  the  violation  of  this  Act  by  any  defendant. 

Sec.  10.  The  word  "person"  or  "persons"  wherever  used  in 
this  Act,  shall  be  deemed  to  include  corporations  and  associations, 
existing  under  or  authorized  by  the  laws  of  either  the  United  States 
or  the  laws  of  any  State  or  Territory  or  the  District  of  Columbia 
or  any  foreign  country. 

The  Chairman:  Gentlemen,  the  paper  by  Mr.  Pavey  is  now 
open  for  discussion.     We  will  be  glad  to  hear  any  remarks. 

Mr.  Hoole  (of  Indianapolis)  :  The  gentleman  who  has  just 
addressed  us  on  the  Sherman  Law  said,  as  I  understood  it,  that 
any  agreement  with  a  competitor  on  trade  or  matters  in  trade  would 
violate  the  law.  In  connection  with  the  discussion  of  this  law,  and 
the  various  heated  arguments  that  have  been  carried  on  upon  this 
subject,  little  has  been  said,  as  far  as  I  could  learn,  in  regard  to 
associations  of  manufacturers,  of  which  there  are  in  this  country 
in  the  neighborhood  of  1,200.  except  where  those  associations  have 
gone  into  pools,  held  intact  by  process  of  fine,  or  some  other  method 
of  intimidation.  Now\  there  are  a  great  many  hundred,  a  great 
many  thousand  manufacturers  in  this  country  who  desire  to  be  in- 
dependent proprietors  of  their  own  plant  and  property.     It   does 


NATIONAL     BUSINESS     CONGRESS  141 


not  make  any  dilTerenoe  to  tlicm  whether  they  do  a  husiness  of 
$50,000.00  a  year  or  $1,000,000.00  a  year.  Tliey  desire  to  run  their 
own  property,  own  it.  It  has  been  recognized,  however,  by  those 
individual  proprietors  that  there  are  certain  features  in  the  trade 
that  can  be  dealt  with  by  means  of  manufacturers'  associations. 

1  happen  to  have  been  personally  connected  in  various  ways 
wMth  twenty-five  such  associations,  and  in  the  last  three  years  25 
per  cent  of  the  discussions  in  those  association  meetings  has  been 
around  tlie  subject  of  wliat  we  can  do  that  is  witliin  the  law.  Now, 
I  am  speaking  merely  to  offer  suggestions  or  as  a  subject  for  dis- 
cussion possibly  tomorrow,  or  by  resolution  in  this  connection,  upon 
the  subject  of  what  the  manufacturers'  associations  can  do  right- 
fully, what  they  can  agree  upon,  and  w^hat  they  cannot  agree  upon. 
I  have  here — I  am  not  going  to  speak  very  long — a  letter  that  I 
w^rote  whicli  happens  to  hit  the  subject  very  closely.  It  covers,  in 
the  headings,  those  things  which  all  those  tw^enty-five  associations, 
the  members  and  the  attorneys  they  retain,  said  could  be  done  under 
the  present  law.  If  construction  were  to  be  carried  to  the  point 
the  last  speaker  stated,  none  of  these  things,  or  hardly  any  of  them, 
could  be  done. 

The  first  is  the  collections  and  credits;  maintenance  of  a  col- 
lection bureau  and  the  maintenance  of  a  rating  broker.  In  this 
city  there  are  four  or  five  associations  of  furniture  manufacturers 
W'orking  out  of  one  offtce  \vho  have  carried  on  for  a  period  of  six 
or  seven  years  a  collective  effort  for  getting  money  from  poor  ac- 
counts. 

The  next  matter,  of  sales,  prices.  There  are  associations  now 
that  have  lists  of  prices  that  are  recommended — not  agreed  upon, 
but  recommended.  x-\lso  the  associations  get  together  and  not  agree 
but  discuss  as  to  which  price  should  be  given  to  an  individual  cus- 
tomer, such  as  jobber's,  retailer's  or  consumer's  price.  There  is 
also  the  matter  of  letting  each  other  know  what  prices  are  given 
in  the  trade,  that  is,  by  reporting  to  a  central  ofiice  what  prices  they 
are  giving  to  different  customers. 

As  a  matter  of  purchasing  material,  the  listing  of  prices  on 
material. 

The  matter  of  uniform  accounting,  of  agreeing  to  all  carry  on 
their  accounts  under  the  same  uniform  scheme. 


142  NATIONAL    BUSINESS     CONGRESS 

Further,  to  deliver  to  the  central  office  the  cost  of  goods.  One 
organization  each  month  has  delivered  to  its  office  from  some  hun- 
dred members  the  costs  on  the  articles  turned  out  in  the  previous 
month. 

There  is  the  matter  of  freights,  insurance ;  the  matter  of  treat- 
ment of  the  sales  policy.  There  are  numerous  matters  which  can 
be  dealt  with  in  a  co-operative  way,  and  this  is  an  attempt  on  the 
part  of  the  small  proprietor  to  combine  with  his  small  proprietor 
in  securing  the  advantages  of  a  large  combination.  Everybody  rec- 
ognizes the  economic  advantage  of  a  large  combination.  These 
organizations  or  these  associations  are  an  attempt  to  give  the  smaller 
companies  the  advantages  of  the  larger  organizations. 

These  association  efforts  are  honest,  well-meant,  and  they  are 
actuated  with  a  desire  to  be  within  the  law,  yet  if  the  present  agita- 
tion, as  it  has  been  interpreted  by  some  of  the  speakers  at  this  meet- 
ing— if  the  agitation  is  carried  on  it  may  go  to  the  point  where 
they  will  say  that  no  competitor  shall  meet  with  his  competitors  in 
any  kind  of  a  meeting,  even  at  a  dinner,  such  as  the  Gary  dinner, 
which  was  criticised  recently  at  Washington.  The  attempts  are 
the  attempts  made  by  the  association  and,  as  seen  by  most  of  the 
manufacturers,  are  to  eliminate  ignorant  competition.  No  one  wants 
to  eliminate  wise  competition  or  co-operative  competition,  which 
produces  better  articles  for  less  money ;  but  to  eliminate  unwise 
competition  and  to  eliminate  the  abuses  in  the  trade  and  to  dis- 
seminate knowledge. 

These  organizations  are  many.  There  are  probably  represen- 
tatives from  four  or  five  in  this  room,  and  they  cover,  even  taking 
into  consideration  the  big  business  of  the  country,  a  larger  capi- 
talization, a  larger  output,  a  larger  investment  than  a  total  of  all  the 
trusts,  so-called,  and  have  more  to  do  with  the  life  of  the  country 
and  the  life  of  the  trade  in  their  various  lines  than  perhaps  do 
the  trusts,  so-called. 

The  point  I  am  coming  to :  I  would  like  to  suggest  that  some 
representatives  of  other  associations  here  endeavor  to  bring  out 
in  some  definite  form  the  statement  of  their  belief  as  to  what  asso- 
ciations can  do  to  formulate  that  into  such  a  state  tb-^t  it  can  be 
presented  in  the  records  of  this  meeting  and,  through  the  com- 
mittee, to  Washington,  in  the  proper  manner. 

I   thank  you,   gentlemen. 


NATIONAL    BUSINESS     CONGRESS  143 

]\Ir.  Bruce:  This  convention  will  have  to  give  expression, 
in  a  clear-cut  manner,  on  these  economic  questions,  in  a  clear-cut 
resolution.  I  desire  also  to  call  your  attention  to  some  of  the  in- 
vestigations and  studies  that  have  been  made  on  this  question. 
Some  ten  years  ago,  there  was  called  a  convention  or  congress  in 
this  city  for  the  purpose  of  ofifering  some  solution  on  the  trust 
problem.  The  congress  or  convention  at  that  time  was  perhaps 
one  of  the  most  important  gatherings  ever  called  in  this  city  to 
solve  a  great  economic  problem.  There  came  to  this  city  men  in 
all  the  activities  of  life,  the  important  activities  in  life,  and  there 
came  out  in  that  discussion  three  distinctive  propositions.  First, 
there  were  those  who  held  the  trusts  were  vicious ;  there  were 
those  who  took  the  other  extreme  and  said.  Let  them  alone ;  and 
there  came  the  third  school  that  held  that  publicity  was  the  remedy. 
That  meeting  was  held  ten  years  ago,  when  a  solution  or  a  study 
of  the  proposition  was  entirely  new.  Eight  years  later  there  w^as 
again  called  a  conference  on  the  same  subject,  and  there  came 
from  all  parts  of  the  country  men  who  had  given  eight  years' 
study,  who  had  come  with  eight  years'  experience,  and  now  watch 
the  change.  There  was  not  one  man  who  said:  "Smash  the 
trusts ;"  there  was  not  one  man  who  had  given  any  thought  or 
study  who  said:  "Let  them  alone;"  nor  was  there  anyone  who  said 
that  publicity  was  the  solution,  but  the  students  and  the  economists, 
the  men  who  had  given  the  subject  thought,  time,  attention  and 
study  were  all  of  one  mind  in  saying  that  proper  regulation  was  its 
only  solution.  That  there  were  combinations  and  agreements  w^hich 
w^ere  beneficial  to  the  public,  and  that  there  were  those  that  were 
harmful;  and  I  hold  that  that  solution  must  be  applied.  Sherman 
Law  or  no  Sherman  Law,  the  conclusion  will  have  to  be  that  there 
are  agreements  upon  prices  and  grades  and  commodities  that  are 
beneficial,  not  only  to  the  producer,  who  has  a  right  to  a  proper 
earning  upon  his  investment,  who  has  a  right  to  be  protected,  but 
it  will  also  be  beneficial  to  the  consumer. 

And  so  I  hold  to  the  conclusion  that  there  will  have  to  be  regu- 
lation, and  that  regulation  cannot  be  state  regulation,  but  must  be 
federal  regulation,  and  that  there  must  be  established  some  agency — 
call  it  industrial  commission,  a  court  of  commerce — that  will  have 
to  determine  upon  agreements  and  combinations  that  are  beneficial 
and  upon  agreements  and  combinations  that  are  harmful.     I  hold 


144  NATIONAL     BUSINESS     CONGRESS 

that  this  organization,  this  important  gathering,  should  come  to  the 
announcement  that  regulation  must  he  the  proper  solution. 

Tomorrow  resolutions  will  he  offered  here,  and  those  resolu- 
tions ought  to  be  upon  progressive  lines,  accepting  the  best  thought 
of  the  day,  and  then  send  them  out  to  the  country  as  the  expres- 
sion of  progressive  and  advanced  manufacturers  and  business  men. 
(Applause.) 

The  Chairman:  The  meeting  is  now  open  for  discussion  of 
the  general  propositions  on  all  the  papers  that  have  been  read  and, 
at  the  same  time,  anticipating  the  papers  to  be  read  tomorrow.  The 
Resolutions  Committee  will  be  very  glad  to  have  a  free  and  frank 
expression  of  opinion.  It  may  be  of  some  value  to  them  and  help 
them  to  formulate  the  resolutions  in  correspondence  to  the  ideas 
of  the  Congress. 

Mr.  Bannister  (of  Indiana)  :  Mr.  Chairman  and  Gentlemen: 
I  am  a  manufacturer  of  over  twenty-seven  years'  experience,  and  I 
am  very  much  interested  in  the  subject  of  the  last  paper,  perhaps 
in  a  dififerent  form  as  it  might  apply  to  organizations. 

There  was  a  time  in  our  history  when  the  human  family  was 
the  complete  organization  of  government,  commerce  and  trade. 
The  father's  and  mother's  idea  and  word  was  law ;  the  son  cut  the 
trees  and  the  daughters  spun  the  yarn  to  make  the  clothing.  That 
was  common,  and  the  two  combined,  or  the  three  combined  made 
the  labor  organizations.  At  such  time  there  was  no  such  thing  as 
strikes,  lock-outs,  combinations  in  restraint  of  trade.  There  could 
not  be  such  things. 

We  have  had  for  a  long,  long  time  efforts  to  restrain  combina- 
tions. As  I  said,  I  am  a  manufacturer;  I  am  also  a  Republican, 
always  have  been,  and  I  have  a  definition  in  my  own  mind  of  the 
difference  between  a  Republican  and  a  Democrat:  the  Republican 
is  the  fellow  who  finds  fault  with  that  which  is  wrong;  the  Demo- 
crat also  finds  fault  with  that  which  is  wrong,  and  up  to  that  point 
they  are  both  alike,  but  the  Republican  always  tries  to  provide  a 
remedy ;  the  Democrat  simply  finds  fault. 

What  is  the  remedy  for  all  of  this  we  have  been  talking  about? 
Is  competition  the  life  of  trade?  No,  no.  My  dictionary  tells  me 
that  competition  means  strife  for  the  same  object,  and  it  goes  on 
and  says :  "Fights,  battles."     And  you  could  add  something  else  to 


NATIONAL     BUSINESS     CONGRESS  145 


it:     Competition,  strife  for  the  same  object  means  battle,  fight  to 
death.     So  that  unrestrained  competition  means  the  death  of  trade. 
How  are  we  going  to  remedy  it?     Not  by  continuing  compe- 
tition.    I  can  take  you  down  on  Fourth  Avenue  in  the  city  of  Xew 
York,  as  I  have  been  there  on  an  August  afternoon,  and  see  httle 
girls  fourteen  or  fifteen  years  old — Sunday  afternoon,  at  that — on 
the  second  or  third  or  fourth  floor,  running  a  sewing  machine,  mak- 
ing shirts  at  a  starvation  wage  so  that  you  and  I  or  anybody  else 
can  buv  them  at  fifty  cents  apiece.     That  is  one  branch  of  the  com- 
petition ;  they  start  where  the  daughters  spun  the  yarn.     We  have 
in  Chicago  one  branch  of  the  family  and  another  in  Xew  York,  and 
thev  go  back  and  forth  on  the  competitive  idea  until  there  is  noth- 
ing for  them  to  do.     The  manufacturer  cannot  do  anything  else  ex- 
cept to  meet  the  Xew  York  competition ;  the  Xew  York  man  is  not 
to  blame,  because  he  cannot  do  anything  but  meet  the  Chicago  com- 
petition.    Labor  is  ground  down  by  this  competition  until  there  is 
nothing  for  them  to  do  but  strike.     You  had  a  good  example  of  it 
in  Chicago  a  short  time  ago  among  your  clothiers.     There  were  some 
battles,  and   I   think  eighteen  deaths   were  the  result.     I   maintain 
that   the   remedy    for  all   this   is   a   national   law   that   will   not   at- 
tempt to  prevent  organization,  but  that  will  absolutely  require  people 
of  a  like  interest  to  come  together  into  an  organization  and  become 
bureaus  of  information  that  wall  show  their  right  to  live;  that  will 
show  that  they  pay  their  laborers  a  reasonable  price ;  that  will  show 
to  the  producer  that  there  is  a  profit  in  the  business,  and  show  next 
to  the  customer  and  to  the  public  finally.     The  producer  must  know, 
in  order  to  be  able  to  continue  in  the  business,  that  he  is  making 
money.     The  consumer  must  know,  because  he  is  the  public,  and  he 
must  be  willing  to  pay  the  laborer  his  hire,  and  the  public  generally 
that  invest  their  money  in  those  organizations,  must  know  that  they 
are  safely  invested.     I  do  hope  that  this  Congress,  before  it  ad- 
journs, will  come  to  some  distinct  and  positive  recommendation.     I 
am  not  a  lawyer,  and  you  can  confuse  me  very  quickly  upon  the  law 
points,  but  the  object  to  be  reached  is  that  which  will  enable  all 
trade,  all  commerce  in  this  country  to  be  conducted  at  a  profit  and 
to  pay  its  labor  a  worthy  hire. 

The  chair  that  I  have  hold  of  with  my  hand  has  nothing  what- 
ever in  it  except  labor,  absolutely  nothing.  The  clothes  that  are 
upon  vour  backs  have  nothing  in  them  that  makes  them  cost  any- 
thing except  labor.     When  God  created  the  earth  and  man  He  gave 


146  NATIONAL     BUSINESS     CONGRESS 


liini  everything  that  was  on  it  and  in  it  and  said,  Go  out  and  utiHze 
it.  The  only  thing  that  made  it  cost  anything,  your  coat,  was  the 
labor  that  had  been  put  into  it  up  to  that  point,  and  the  only  thing 
that  made  it  cost  anything  to  the  man.  There  is  absolutely  no  such 
thing  as  cost  of  raw  material.  The  ore  costs  nothing  in  the  ground; 
the  coal  costs  nothing  in  the  ground.  The  wood  in  the  trees 
costs  nothing  on  the  ground.  There  was  no  charge  made  by 
the  Creator  when  He  gave  them  to  mankind,  and  the  only  thing 
that  has  made  them  cost  anything  is  the  labor  that  we  have  put  in 
them.  Now,  then,  if  we  are  going  to  continue — and  we  are  all 
laborers — to  live  and  to  live  right,  we  are  going  to  be  obliged  some- 
times to  share  equally  and  rightfully  with  each  other  as  we  go  along, 
and  that  can  be  done,  in  my  opinion,  by  a  law  that  requires  every 
interest  of  a  like  nature  to  form  itself  into  an  organization  which 
will  be  able  to  show  whatever  officer  or  executive  committee  or  any- 
thing else  you  may  put  in  it,  that  it  has  the  right  to  live. 
Gentlemen,  I  thank  you.     (Applause.) 

Mr.  Stackhouse  (of  Springfield,  Ohio)  :  Mr.  Chairman  and 
Gentlemen  of  the  National  Business  Congress:  In  my  judgment, 
it  has  been  a  splendid  thing,  particularly  to  all  this  great  organiza- 
tion, to  get  together  here  this  week,  the  representatives  of  so  many 
commercial  organizations  and  so  many  various  lines  of  business, 
for  the  purpose  of  indulging  in  a  discussion  absolutely  dispassion- 
ate, as  well  as  equally  non-political,  upon  some  of  the  most  important 
questions  of  the  day  that  have  been  selected  with  most  rare  dis- 
crimination, in  my  judgment,  by  this  organization,  under  whose 
auspices  this  meeting  is  beng  held.  And  while  no  one  can  ques- 
tion the  vast  importance  of  the  various  subjects  that  we  are  invited 
to  consider  here  today,  nevertheless,  out  of  many  of  the  half  dozen 
problems  that  are  submitted  at  any  time  for  the  consideration  of 
thoughtful  men,  existing  conditions  at  that  particular  time  of  neces- 
sity makes  one  of  those  problems  of  more  or  less  paramount  inter- 
est. That,  I  submit,  is  the  case  today,  for,  owing  to  the  present 
exigencies  of  our  political  and  commercial  situation,  in  my  judg- 
ment, the  industrial  situation  is  paramount  in  importance  even  to 
the  half  dozen  other  propositions  so  commendably  and  intelligibly 
submitted  for  your  consideration  by  this  organization.  And,  pro- 
ceeding on  that  premise,  I  also  submit  that,  inasmuch  as  all  of  us 
who  are  in  industry,  whether  on  a  large  or  small  scale,  are  vitally 


NATIONAL    BUSINESS     CONGRESS  147 


interested  in  all  legislation  that  atTects  industry,  for  the  reason  that 
anything,  whether  legislative  in  character  or  otherwise,  that  affects 
the  principal  industrial  organizations  of  this  country,  of  necessity 
affects  correspondingly  all  industry. 

Hence,  it  is  particularly  appropriate  that,  regardless  of  our  re- 
spective lines  of  business,  we  devote  our  most  serious  thought 
to  the  consideration  of  this  particular  problem  at  this  time.  It  is 
of  even  more  importance  that  we  do  this,  for  the  reason  th.it  the 
general  serious  apprehension  existing  everywhere  with  reference  to 
our  vast  commercial  interests  is  principally  due.  or  at  least  in  a 
large  part  due,  to  the  delivery  of  national  affairs  to  demagogues  of 
various  kinds,  whether  political,  labor  or  otherwise,  and  to  more  or 
less  theoretical  and  professional  reformers,  political  opportunities 
in  their  political  efforts  to  correct  certain  defects.  All  that  aft'ects 
our  industrial  life,  and  it  is  especially  appropriate  that  this  subject 
be  considered  in  this  city  and  in  this  country. 

We  were  told  here  by  one  of  the  distinguished  speakers  yester- 
day, and  correctly  so,  that  the  foreign  commerce  of  this  country, 
including  our  exports  and  imports,  exceeded  the  tremendous  sum 
of  three  and  one-half  billion  dollars  annually,  while  our  internal 
commerce  has  reached  incredible  and  almost  incomputable  figures. 
As  an  illustration :  It  was  approximately  estimated  here  yesterday 
that  the  total  commerce  of  this  country  amounted  to  thirty  billion 
dollars,  a  sum  vastly  beyond  the  comprehension  of  every  one  of  us. 
Our  enormous  railroad  systems  comprise  a  mileage  of  142,000  miles, 
so  that  you  see  our  commercial  interests  not  only  are  decidedly 
substantial,  but  it  is  our  commendable  boast  that  our  country  today 
occupies  a  prominent  position  in  the  entire  commercial  world,  which 
at  this  time  is  seriously  threatened  by  certain  persons  to  whom  I 
have  just  alluded. 

During  its  early  history,  when  our  population  was  scattered 
and  not  very  numerous,  it  was  chiefly  engaged  in  agricultural  pur- 
suits, to  which  later  on  was  added  the  manufacturing  business,  and 
then  the  solution  of  the  transportation  problem  by  the  building  and 
operating  of  our  vast  railroad  systems. 

Immediately  after  the  Civil  War  and  its  general  devastating 
effects  Congress  resumed  its  sway,  and  our  people,  constantly  and 
largely  reinforced  by  a  desirable  emigration  from  the  British  Isles 
and  Central  and  Northern  Europe,  again  turned  their  attention  to 


148  NATIONAL     BUSINESS     CONGRESS 


the  i)eaceful  pursuits  of  industry,  and  also  by  way  of  stimulating 
influential  energy  and  mechanical  ingenuity  in  addition  to  build- 
ing up  a  substantial  foreign  trade.  Gradually,  however,  as  our  pop- 
ulation increased,  due  not  only  to  natural  laws,  but  to  this  vast 
emigration  to  which  I  have  referred,  our  commercial  system  corres- 
pondingly increased  in  volume,  and  in  its  tremendous  ramifications 
in  the  mad  strife  for  business,  competition  became  so  keen — and  we 
hear  a  great  deal  of  competition  nowadays,  resulting  from  the  com- 
petitive system— competition  became  so  keen  that  operatives  in  most 
of  our  factories  and  elsewhere  were  vastly  underpaid.  Railroads 
became  engaged  in  the  issuing  of  discriminatory  rates  and  granting 
rebates,  thereby  seriously  injuring  and  impairing  the  welfare  of 
many  communities  and  many  shippers;  while  the  manufacturer  like- 
wise pursued  the  same  ruinous  competitive  policy  of  selling  his  prod- 
ucts around,  or  regardless  of,  cost,  and  at  the  same  time,  or,  to  be 
more  specific,  in  1890,  owing  to  a  general  apprehension  that  certain 
large  corporations  or  combinations  of  capital  would  be  effected  for 
the  purpose  of  obtaining  a  monopoly  in  our  various  lines  of  business 
among  rivals  in  those  lines  the  Sherman  Act  was  adopted,  absolutely 
proscribing  such  mergers,  and  providing  severe  penalties  for  its  vio- 
lation. Now,  regardless  of  how  much-gifted  attorneys  may  see  fit 
to  indulge  in  a  technical  discussion  of  either  the  spirit  or  whole  of 
the  Sherman  Act,  its  general  character  is  absolute  prohibition  of  all 
industrial  combinations.  That  is  the  temper  of  the  law,  both  in 
spirit  and  letter.  Consequently,  with  our  multitudinous  concerns  in 
the  various  lines  constituting  our  industries  being  absolutely  pro- 
hibited from  either  decreasing  their  numbers  or  increasing  their 
effectiveness  in  the  way  of  indulging  in  these  combinations,  the  Sher- 
man Act  absolutely  prohibited  it,  and  with  the  result  that  I  have 
indicated,  that  during  the  last  decade  of  the  last  century  general  ap- 
prehension and  the  most  disastrous  situation  prevailed  generally  in 
this  country  among  all  lines  constituting  our  industrial  system — and 
gentlemen,  that  not  only  includes  capital,  the  employer,  but  the  rail- 
roads and  labor  of  all  kinds.     What  is  the  result? 

During  the  first  decade  of  the  twentieth  century,  and  more  or 
less  in  contravention  of  the  provisions  of  the  Sherman  Act,  com- 
binations were  made  and  indulged  in  as  a  matter  of  interest  or  ex- 
pediency. The  railroads,  for  instance,  adopted  the  pooling  system 
and  provided  through  rates  and  routes  for  both  passenger  and 
freight,  while  numerous  industrial  combinations  engaged  rival  lines 


NATIONAL     BUSINESS     CONGRESS  149 


which  were  affected.  At  the  same  time  labor  organizations  were 
rapidly  formed  for  the  most  commendable  purposes.  I  wish  to  state 
right  here  that  during  the  early  years  of  their  existence  they  accom- 
plished splendid  results  in  the  way  of  inducing  manufacturers  to 
provide  safe  and  sanitary  surroundings  in  which  they  should  be  em- 
ployed. They  were  also  later  on  largely  instrumental  in  the  adoption 
of  laws  in  our  various  states,  covering  the  installation  of  safety 
devices  for  the  prevention  of  accidents ;  and.  in  addition  to  that,  they 
vigorously  endeavored  to  induce  employers  to  pay  larger  and  more 
stable  wages,  which  was  perfectly  proper,  in  my  judgment. 

But.  on  the  other  hand,  the  underlying  idea  which  prompted 
these  concerns  to  effect  these  combinations  more  or  less  illegally, 
as  they  were,  was  for  the  purpose  of  obtaining  some  economical 
results  in  the  management  of  their  organizations,  besides  increas- 
ing their  efficiency,  and  being  able  to  sell  their  product  at  a  profit,  but 
at  moderate  prices.  That  was  the  underlying  idea,  regardless  of 
how  it  may  have  worked  out  in  certain  cases.  And.  gentlemen,  we 
must  remember  that  stability  both  of  prices  and  of  labor  is  one  of 
the  most  important  elements  involved  in  our  commercial  system ;  but 
just  as  the  permanent  success  of  labor  is  dependent  on  the  stability 
of  living  and  reasonable  wages,  so.  gentlemen,  is  the  success  of  the 
commercial  end  of  industry  absolutely  contingent  upon  the  stability 
of  moderate  prices. 

Now.  as  the  result  of  these  various  combinations  that  w^ere 
effected,  both  by  the  commercial  end  of  industry  and  labor,  what 
was  the  result?  During  the  first  decade  of  this  century  we  in- 
creased our  internal  commerce,  as  I  have  stated,  to  almost  incredible 
figures,  and  our  foreign  commerce,  including  both  imports  and  ex- 
ports, reached  the  enormous  sum  of  three  and  a  half  billion  dollars 
a  vear.  while,  on  the  other  hand,  the  American  workman  received 
higher  wages  than  he  ever  had  before  or  than  were  paid  elsewhere, 
and  general  prosperity  reigned  throughout  the  land.  Then,  unfortu- 
nately, gentlemen,  and  owing  to  the  inherent  cupidity  of  human  na- 
ture, certain  of  our  industrial  combinations  to  wdiich  I  have  referred 
began  to  indulge  in  certain  reprehensible  methods  for  the  obvious 
purpose  of  obtaining  a  monopoly  in  restraint  of  trade,  and,  on  the 
other  hand,  by  strangling  competition  or  destroying  it.  which  it  did 
sometimes  by  selling  at  moderate  prices.  And,  on  the  other  hand, 
labor  unions  likewise,  apparently  having  become  unsettled  by  their 


150  NATIONAL    BUSINESS     CONGRESS 

uiiprecctlcnted  power  and  the  remarkable  prosperity  of  their  mem- 
bers, inckilged  in  some  very  reprehensible  methods,  such  as,  for  in- 
stance, in  unreasonable  demands  for  further  advance  in  wages,  for 
the  recognition  of  the  union  to  such  an  extent  that  without  its  ap- 
proval none  of  the  proprietors  of  industry  could  make  eflfective  any 
economical  policy  whatsoever  in  the  management  of  their  business. 
In  addition,  restricting  output  and  resorting  to  criminal  and  cowardly 
boycott. 

At  the  same  time  a  most  vigorous  warfare  was  started  by  or- 
ganized labor  throughout  the  country,  which  became  exceedingly 
hostile  against  unorganized  labor,  while  certain  labor  leaders  con- 
nived at  and  promoted  more  or  less  crimes,  some  of  which  culmi- 
nated in  murder,  with  some  of  which  we  are  more  or  less  familiar, 
owing  to  recent  exposures.  So  now,  gentlemen,  we  have  seen  in  a 
brief  way  the  disastrous  results  incidental  to  unlimited  competition 
up  to  the  close  of  the  Nineteenth  Century.  We  have  also  seen  the 
equally  disastrous  results  in  other  respects  incidental  to  unre- 
stricted monopoly  in  certain  lines ;  and  we  are  now  confronted 
with  the  proposition  of  how  to  solve  the  perplexing  problem — and 
perplexing  it  certainly  is  to  all  of  us. 

Now,  in  connection  with  this  problem,  it  must  be  borne  in 
mind,  particularly  by  these  gentlemen  who  are  advocating  the  resur- 
rection of  the  old  competition  system  to  Congress,  that  wdien  you 
advocate  that,  in  order  to  be  consistent  and  fair,  you  must  apply 
that  same  ruinous  policy  to  all  the  elements  constituting  our  com- 
merce, the  principal  elements  being  capital  and  labor,  because  it  must 
be  patent,  manifestly  patent,  to  any  one  that  you  cannot  success- 
fully apply  the  competitive  system  to  the  commercial  end  of  indus- 
try only,  wdiile  maintaining  high  wages  on  a  high  basis. 

Another  thing:  if  industrial  combinations  are  wrong  theoreti- 
cally, it  would  seem  to  be  that  labor  combinations  are  also  wrong 
in  principle,  as  both  affect  prices. 

In  my  opinion,  another  very  important  contributory  element, 
that  is  contributory  to  the  present  existing  distressing  situation  in 
our  industrial  system,  is  the  apparently  fixed  and  destructive  policy 
of  our  national  administration,  in  attempting  to  solve  a  perplexing 
problem  solely  in  each  case  by  litigation — instead  of  attempting  to 
specifically  advise  industry  as  to  what  it  can  properly  do  within  the 
law  in  the  successful  conducting  of  its  business,  or  at  least  in  co- 
operating with  industry  in  both  a   friendly  and  public  manner  in 


NATIONAL     BUSINESS     CONGRESS  151 


ascertaining  what  it  can  do,  or  in  assisting  it  in  obtaining  proper 
and  specific  legislation;  legislation  so  specific  in  its  provisions,  that 
it  would  be  easily  understood,  so  that  in  that  event,  its  violation 
would  i?e  absolutely  inexcusable.  And,  gentlemen,  in  this  connec- 
tion it  must  be  remembered,  at  least  in  my  opinion,  that  the  present 
drastic  measures  that  are  being  applied  to  industry  indiscrimi- 
nately, in  order  to  solve  this  problem,  are  bound  to  be  as  unsatis- 
factory in  their  eflfects  as  would  be  the  case  of  a  surgeon  in  attempt- 
ing to  correct  some  defect  in  the  human  system  by  amputating  his 
patient's  head. 

Gentlemen,  as  a  solution  of  this  problem,  let  me  again  remind 
you  of  the  self-evident  fact  that  capital  and  labor  constitute  the  two 
principal  component  parts  of  industry.  Without  the  existence  of 
either  of  these  two  elements,  there  can  be  no  industry.  And  with- 
out their  friendly  co-operation,  there  can  be  no  prosperity  per- 
manently. 

And,  that  being  the  case,  gentlemen,  in  my  judgment,  it  be- 
comes absolutely  necessary  that  all  labor,  whether  organized  or  not 
—labor's  interest  might  be  seriously  jeopardized  by  this  w^iolesale 
attack  on  industry,  this  ill-advised  attack  on  our  commercial  sys- 
tem, as  is  the  commercial  end  of  industry,  as  both  are  equally  ni- 
volved  in  our  commercial  system.  Now,  if  that  conclusion  is  true, 
it  then  seems  to  me  absolutely  necessary  that  the  commercial  end 
of  industry  invite  the  rank  and  file  of  all  labor— and  with  reference 
to  organized  labor,  in  my  opinion,  the  rank  and  file  of  organized 
labor  are  not  criminals  nor,  in  my  judgment,  are  they  going  to  per- 
mit themselves  to  be  further  led  by  some  criminal  leaders. 

Hence,  I  make  this  statement,  that  we  appeal  to  the  rank  and 
file  of  all  labor  to  join  in  an  honest  endeavor  to  induce  the  proper 
governmental  authorities,  both  national  and  state,  to  co-operate 
with  us  towards  stimulating  a  general  resumption  of  industry  m 
the  way  of  the  legal  substitution  for  the  present  obsolete,  restrictive 
policy  under  which  we  are  obliged  to  operate  without  violation  of 
the  law;  for  equitable  legislation  that  will  discriminate  against  no 
class ;  that  will  be  constructive  in  character ;  that  will  be  specific  in 
its  provisions,  and  so  comprehensive  in  its  scope  as  to  aflford  the 
necessary  facilities  for  the  successful  conducting  of  the  country's 
business  in  its  constantly  increasing  volume,  and  in  this  way  I  sub- 
mit that  this  country  will  be  able  even  to  excel  all  past  records 


152  NATIONAL     BUSINESS     CONGRESS 


\vhich  have  given  it  its  present  ])restige  and  pre-eminent  position  in 
the  entire  commercial  world,  and  in  this  way  can  we  rest  assured, 
gentlemen,  that  the  American  Magle  will  soar  to  the  zenith  of  com- 
mercial prosperity  and  power. 

I  thank  you.      (Applause.) 

Mr.  Wallis  :  I  just  want  to  say  a  word  on  this  labor  proposi- 
tion. In  all  of  the  papers  of  nearly  all  of  the  speakers,  my  own  in- 
cluded, we  have  referred  to  organized  labor.  Xow,  I  think  that 
this  Association,  in  its  wisdom,  with  reference  to  any  resolution 
touching  upon  tiie  labor  situation,  should  bear  in  mind  that  organized 
labor  as  it  is  known  today,  does  not  represent  labor.  It  represents 
possibly  ten  per  cent.  And  it  is  the  duty,  as  I  undersand  it.  of  the 
business  man  of  today  to  draw  unto  him  the  ninety  per  cent ;  and 
if  in  the  past  employers  of  labor  in  this  country  had  not  been 
cowardly  in  their  attitude  toward  labor,  they  would  have  had  ninety 
per  cent  with  them. 

You  can  go  back  over  the  history  of  the  strikes  that  have  taken 
place  in  this  country,  and  men  have  been  willing  to  come  in  to  have 
an  opportunity  to  improve  their  condition,  and  you  have  given  them 
that  opportunity  until  you  settled  with  the  labor  union.  Then 
those  men  went  out  in  the  street.  What  would  they  do,  or  what 
would  you  or  I  or  anybody  else  do  under  similar  circumstances? 
You  would  go  and  join  some  sort  of  an  organization  for  protection. 

If  the  business  men  of  this  country  will,  in  this  session,  or 
some  session  following  this,  promulgate  a  business  policy  for  the 
protection  of  labor — not  organized  labor,  but  all  labor — and  build  a 
fence  strong  enough  so  that  when  a  man  who  does  not  belong  to  a 
labor  organization  feels  he  can  lean  up  against  it  and  the  fence  is 
not  going  to  give  way.  he  will  be  glad  to  come  in  with  you,  because 
the  rank  and  file  today  realize  that  upon  business  prosperity  hinges 
their  prosperity;  that  if  business  does  not  prosper  and  they  cannot 
be  employed,  they  are  at  a  disadvantage.  But  I  think  that  we  should 
make  a  clear  cut  distinction  between  organized  labor  and  the  rank 
and  file. 

The  Chairman  :  The  floor  is  now  open  for  any  resolutions 
which  may  be  ready  to  ofifer,  to  be  referred  to  the  Resolutions  Com- 
mittee. 


NATIONAL     BUSINESS     CONGRESS  153 

Mr.  Pavey  :  Mr.  Chairman,  at  tlie  suggestion  of  one  or  two 
men,  I  am  asked  to  propose  a  resolution,  that  a  committee  of  five 
be  appointed  for  the  purpose  of  consulting  together  for  the  purpose 
of  forming  an  association,  the  objects  of  which  will  be  similar  to 
this;  and  before  we  adjourn,  I  ofifer  that  resolution:  that  the  Chair- 
man appoint  a  committee  of  five,  or  it  can  be  referred  to  the  Com- 
mittee on  Resolutions. 

The  Chairman  :  The  resolution  is  in  relation  to  the  appoint- 
ment of  a  committee  of  five,  or  at  least  for  the  Resolutions  Com- 
mittee to  appoint  a  committee  of  five,  to  bring  about  some  plan  of 
forming  an  Association  which  will  embody  all  of  the  Associations 
in  the  form  of  a  National  Association,  and  making  a  business  con- 
gress for  carrying  out  the  resolutions  of  the  different  congresses 
as  they  are  made.  In  other  words,  to  make  a  permanent  National 
body. 

Mr.  Pavev  :  In  explanation  of  the  resolution,  the  language 
is  a  little  indefinite.  The  desire  was  to  arrive  at  some  permanent 
organization  that  w^ould  make  other  congresses  effective  in  their 
work. 

Mr.  Wallis:  I  quite  agree  with  the  idea  of  the  necessity  for 
such  action,  but  isn't  that  properly  a  subject  for  our  Resolutions 
Committee  ? 

The  Chairman  :  This  is  authorizing  the  Resolutions  Com- 
mittee to  formulate  that  plan,  only. 

Mr.  Wallis  :  Why  not  present  the  idea  to  them  and  let  them 
formulate  a  resolution  which  would  cover  it? 

The  Chairman  :     That  is  the  resolution. 

Mr.  Wallis  :  I  thought  the  resolution  was  for  the  appoint- 
ment of  a  committee  of  five. 

The  Chairman  :     For  them  to  do  that  if  they  like,  or  not. 

Mr.  P.wey:  Perhaps  I  did  not  express  myself  very  well. 
The  suggestion  was  made  that  the  chair  appoint  a  committee  of 
five,  but  it  was  also  suggested  that  if  this  question  be  referred  to 
the  Committee  on  Resolutions,  it  would  not  be  necessary  to  appoint 


154  NATIONAL     BUSINESS     CONGRESS 

a  new  committee,  but  to  refer  it  to  the  Resolutions  Committee,  or  a 
committee  of  five  should  work  out  some  sort  of  a  plan. 

Mr.  Boothe:  I  would  say  that  this  matter  is  now  under  con- 
sideration by  the  Resolutions  Committee.  I  would  also  request 
that  anyone  having  resolutions,  should  present  them  before  the  clos- 
ing of  this  meeting. 

The  Chairman  :  Are  there  any  further  resolutions  to  go 
before  the  Resolutions  Committee? 

Mr.  Wallis  :  I  suggested,  in  my  address  yesterday,  that  we 
might  possibly  agree  upon  the  recommendation  on  the  monetary 
situation,  concurring  with  the  action  of  the  bankers  on  legislation. 

The  Chairman  :  I  think  it  would  be  better  for  you  to  put 
that  in  the  form  of  a  resolution,  or  request  to  the  Committee,  and 
let  it  go  right  directly  to  them. 

Mr.  Wallis  :  ]\Iy  only  thought  was  that  possibly  we  might 
now  discuss  it  informally  for  the  benefit  of  the  Resolutions  Com- 
mittee. 

On  motion,  duly  seconded,  the  meeting  adjourned  until 
Wednesday,  December  13,  1911,  at  the  hour  of  10:30  o'clock  a.  m. 


NATIONAL     BUSINESS     CONGRESS 


155 


FIFTH    SESSION. 


Wednesday,  December  13,  1911. 
10:30  o'clock  A.  M. 

The  Chairman  :  The  convention  will  please  come  to  order. 
Gentlemen,  the  first  address  this  morning  is  by  Mr.  Frederic  A. 
Delano.  Mr.  Delano  is  unable  to  be  with  us,  and  Mr.  Nye  will 
read  his  speech. 

Mr.  James  W.  Xye  (of  Illinois)  :  Mr.  Chairman  and  Gentle- 
men:  I  know  we  all  regret  that  Mr.  Delano's  views  upon  Trans- 
portation will  miss  the  charm  of  his  personality  in  presenting  them. 
I  will  endeavor,  and  hope  that  in  reading  them,  I  may  not  obscure 
his  mind. 

TRANSPORTATION. 


By  Frederic  A.  Delano,  President  of  the  Wabash  Railroad  Co. 


As  long  as  300  years  ago,  Sir  Francis  Bacon  had  pointed  out 
that  the  sources  of  wealth  of  any  nation  were:  First,  its  pro- 
ductivity, in  other  words,  the  productive  capacity  of  its  natural  re- 
sources; Second,-  the  manufacture  of  raw  materials  into  a  form 
more  useful  to  man ;  Third,  the  vecture,  or  transportation,  from  the 
point  where  they  were  produced  or  manufactured  to  the  point 
where  they  could  be  used.  This  statement  may  be  tabulated  for 
convenient  reference,  as  follows: 


The   Creation 
of   Wealth. 


I. 

From  the  Productive- 
ness of  Natural  Re- 
sources. 

From  the  Manufacture 
or  Adaptation  of  Raw 
Materials. 

From  the  Vecture  or 
Transportation  o  f 
Raw  and  Manufac- 
\      tured  Materials. 


From  Tillage  of  the 
Soil. 

From  Mines  and  Quar- 
ries. 

From  Forests. 


156  NATIONAL     BUSINESS     CONGRESS 

This  very  simple  and  fundamental  statement  is  worth  bearing 
in  mind.  Xo  nation  can  grow  rich  if  it  consumes  more  than  it 
produces,  and  lavish  expenditure — as  economists  ha\e  realized  for  a 
long  time — is  never  an  index  of  growing  wealth.  Some  econo- 
mists, for  example,  have  pointed  out  that  in  times  of  severe  stress, 
following  great  wars  or  famines,  the  increase  in  the  wealth  of  the 
nation  has  been  much  greater  than  in  so-called  "good  times." 

Adam  Smith,  the  father  of  modern  political  economy,  writing 
150  years  ago,  pointed  out  that  the  world  is  divided  as  between 
productive  and  non-productive  consumers,  showing  also  how  it  was 
necessary  in  primitive  times  for  every  able  bodied  man  and  woman 
to  aid  in  the  production  of  wealth,  whereas  in  the  more  civilized 
times  only  one  individual  in  five,  or  six  or  seven,  was  a  producer. 

It  is  my  purpose  in  this  paper  to  deal  with  Transportation  as 
one  of  the  fundamental  means  of  wealth  creation,  and  to  illustrate 
its  growth,  its  necessity,  and  its  future  possibilities. 

II. 
THE  NATURE   OF   TRANSPORTATION   SERVICE. 

Transportation  is  a  service.  It  is  intangible.  Unlike  other 
forms  of  produced  wealth,  while  it  adds  to  the  value  of  a  com- 
modity, it  is  not  an  entity  which  can  be  stored  up  or  manufactured 
with  regularity  and  sold  at  convenience.  Transportation,  in  other 
words,  is  a  service  which  can  only  be  sold  at  the  time  it  is  re- 
quired. In  many  periods,  and  for  long-continued  periods,  trans- 
portation capacity  may  be  far  in  excess  of  the  requirements,  and  yet, 
it  cannot  be  manufactured  if  not  wanted.  The  obvious  result  of 
this  is  that  while  there  may  be  a  great  over-production  of  transpor- 
tation capacity,  there  never  can  be  an  actual  over-production  of 
transportation. 

III. 

There  are  three  principal  forms  of  transportation  service,  the 
importance  of  which  so  far  exceeds  that  of  all  other  forms  that 
only  they  need  be  considered  in  a  discussion  of  the  question.  These 
are : 

(a)  Transportation  by  Water. 

(b)  Transportation  by  Street  or  Highway. 

(c)  Transportation  by  Rail. 


NATIONAL     BUSINESS     CONGRESS 


157 


This  statement  may  be  conveniently  tabulated  as  follows : 


O 
(—1 

H 

<: 

H 
f^ 
O 

CO 

< 


By    Water 


By    Streets  and 
Hiwhwavs    .  . . 


By    Railway. 


Natural  Water- 
ways  

Artificial 
Waterways. 

By  Animal- 
d  r  a  w  n    \"e- 

hicles. 
B  y       Motor- 
drawn    \  e- 
hicles. 

Steam  Rail- 
ways. 

Electric  R  a  i  1- 
ways. 


Ocean. 
Lakes. 
Rivers 
Canals 


or    Ca- 
n  a  1  i  z  e  d 

Rivers. 


The  development  of  each  of  these  three  methods  has  been  very 
marked  in  recent  years,  and  in  no  country  more  so  than  in  the 
United  States.  We  may  safely  lay  down  certain  general  conclu- 
sions in  respect  to  these  three  methods  of  transportation.  Each 
has  its  proper  sphere  and  its  peculiar  function  to  perform  in  the  life 
of  the  community,  and  while  these  may  overlap  one  another  to  a 
limited  extent,  any  marked  distortion  of  them  must  be  productive 
of  an  economic  waste. 

Transportation  by  Water.  To  be  economical,  this  mode  of 
transportation  requires  the  use  of  very  large  units.  The  1,500-ton 
barge  in  canal  and  river  transportation,  the  12,000-ton  boat  in  lake 
navigation,  the  45.000-ton  vessel  in  ocean  navigation,  are — it  may 
be  said — the  ''last  word''  on  the  subject. 

It  is  easily  seen  that  this  means  of  transportation  is  the  least 
flexible.  The  size  of  the  units  required  for  economical  operation 
and  the  cost  of  providing  suitable  docking  facilities,  bring  this  about. 

Transportation  by  Street  or  Highway.  Under  this  head,  we 
include  animal-drawn  and  motor-driven  vehicles.  The  three-horse 
dray,  the  five  and  seven-ton  motor  truck,  are  the  latest  develop- 
ments of  this  method.  This  is  the  most  flexible  means  of  transpor- 
tation.    It  adapts  itself  to  any  convenient  size  of  unit ;  but  even  the 


158  NATIONAL     BUSINESS     CONGRESS 

largest  unit  possible  is  decidedly  smaller  than  those  which  can  be 
most  advantageously  used  in  either  of  the  other  methods  of  trans- 
portation. 

Transportation  by  Rail.  We  include  in  this  grouping,  steam 
and  electric  traction  on  what  are  universally  known  as  railways.  In 
point  of  the  size  of  economical  units  and  in  flexibility  of  distribu- 
tion, rail  transportation  plainly  falls  about  midway  between  water 
and  highway  transportation.  The  greatest  advances  in  rail  trans- 
portation in  this  and  other  countries,  have  come  since  the  adoption 
of  a  uniform  gauge  of  track  and  a  uniform  type  of  car  construction. 
The  ability  to  overcome  grades,  pierce  mountain  ranges  and  cross 
streams,  or  the  facility  of  reaching  the  factory,  the  receiving  and 
shipping  platform — have  all  contributed  largely  to  its  rapid  develop- 
ment. The  English,  German  and  French  railways  have,  to  some 
extent,  even  greater  flexibility  than  our  own ;  but  this  is  gained  at 
the  expense  of  using  much  smaller  transportation  units,  the  result 
being  a  net  loss  to  the  community  as  a  whole.  Speed  and  regularity 
are  in  favor  of  railway  transportation,  and  have  contributed  to  the 
development  of  high-class  business. 

The  Si::e  of  Units.  If  there  is  one  thing  proved  more  certainly 
than  any  other  (and  this  applies  to  all  methods  of  transportation),  it 
is  that  the  largest  unit  which  can  be  conveniently  used  is  invariably 
the  most  economical.  Thus,  in  ocean  traffic,  the  only  thing  which 
limits  the  size  of  vessels  is  the  depth  of  water  in  our  great  harbors, 
the  ability  to  maneuver  very  large  vessels  in  contracted  channels, 
and — last,  but  not  least — a  volume  of  business  sufficient  to  load  ves- 
sels without  excessive  delay.  In  the  same  way,  on  our  steam  rail- 
roads the  only  thing  which  is  limiting  the  size  of  cars  is  the  width 
and  height  of  clearances,  the  safe  maximum  wheel  loads,  and  volume 
of  business  sufficient  to  make  the  loading  and  unloading  of  cars  pos- 
sible without  too  much  loss  of  time. 

In  passing,  it  may  be  said  that  in  Rail  transportation  there  are 
two  units — the  car  unit  and  the  train  unit.  In  respect  to  both  of 
these,  all  progress  in  the  direction  of  increased  efficiency  has  also 
been  in  the  direction  of  constantly  enlarged  units.  Furthermore, 
the  constant  increase  in  the  wages  of  engine  and  trainmen  has  acted 
as  an  added  spur  towards  the  adoption  of  larger  units. 

In  respect  to  Street  and  Highway  transportation,  it  is  equally 
true  that  each  increase  in  the  size  of  the  unit — where  conditions 
favor  it — effects  an  economy.     Thus,  the  two-horse  dray  has  gener- 


NATIONAL     BUSINESS     CONGRESS  159 

ally  replaced  the  one-horse  cart;  the  three-horse  dray,  in  turn,  has 
replaced  the  two-horse  wagon ;  and  now  the  large  capacity  motor 
truck  bids  fair  to  displace  the  horse-drawn  vehicle — not  wholly,  but 
wherever  the  length  of  the  haul  and  the  volume  of  the  business  war- 
rant. 

IV. 

THE    SEPARATE    FUNCTIONS    WHICH    EACH    MEANS    OF 
TRANSPORTATION  SHOULD  PERFORM. 

It  is  sufficiently  apparent  from  what  has  gone  before,  that  each 
method  of  transportation  has  its  own  separate  and  peculiar  field. 
While  these  three  departments  lie  adjacent  to  each  other,  in  the  main 
they  are  entirely  separate  and  distinct.  None  of  them  can  usurp  the 
functions  or  trespass  upon  the  territory  of  the  other  to  any  great 
extent  without  entailing  an  economic  loss.  It  is  important  that  this 
should  be  clearly  understood,  and  that  neither  prejudice  nor  senti- 
ment should  be  allowed  to  sway  our  judgment  or  influence  action 
calculated  to  destroy  the  resultant  benefits  of  such  an  understanding. 
We  are  dealing  wholly  with  facts,  and  insofar  as  it  is  necessary  to 
form  opinions,  there  are  ample  facts  on  which  to  base  them.  It  is 
my  purpose  to  point  out  the  respective  fields  which  these  methods 
of  transportation  must  properly  fill,  and,  judging  from  the  history  of 
the  past,  to  formulate  the  limitations  which  may  fairly  be  said  to 
circumscribe  them. 

R'-A. 

Beginning  With  JVatcr  Transportation.  It  is  quite  obvious 
that  this  must  be  divided  under  three  general  headings: 

Ocean  Transportation. 

Lake  Transportation. 

River  or  Canal  Transportation. 

As  pointed  out  in  a  report  made  by  the  Chief  of  Engineers  of 
the  United  States,  the  cost  per  ton  of  lading  capacity  for  a  vessel  in 
ocean  service,  is  approximately  $71.00.  Measured  in  a  similar 
way,  the  cost  per  ton  of  lading  capacity  for  a  lake  vessel  is  $41.50; 
and  the  cost  per  ton  of  lading  capacity  for  a  canal  or  river  vessel, 
$12.00.  Because  interest  on  the  investment  and  Marine  Insurance 
form  an  important  item  in  the  cost  of  transportation,  and,  therefore, 
in  the  rates  charged,  it  is  uneconomical  to  employ  an  ocean-going 


160  NATIONAL    BUSINESS     CONGRESS 


craft  in  Lake  or  in  River  navigation,  or  to  employ  a  Lake  vessel  in 
River  or  Canal  navigation.  The  larger  the  unit,  the  greater  its  dis- 
ability for  the  economical  distribution  of  freight.  Thus,  ocean- 
going craft  discharge  their  cargoes  at  New  York,  although  many 
of  them  could  safely  navigate  the  Hudson  and  distribute  their 
cargoes.  Lake  boats  of  the  older  and  smaller  types  coming  into 
the  Chicago  River  used  to  call  at  various  docks  to  receive  and  dis- 
tribute their  loads.  The  larger  the  unit,  the  less  advantageous  does 
this  become,  and  in  connection  with  modern  lake  vessels,  we  see 
lighters  employed  to  collect  and  distribute  the  cargo. 

The  cost  of  water  transportation  is  not  generally  known.  A 
considerable  share  of  it  is  borne  out  of  general  taxes  in  the  form 
of  governmental  expenditures  for  the  maintenance  of  Harbors, 
Dock  facilities,  River  improvement  work,  Lighthouse  service.  Life- 
saving  Stations,  the  exemption  of  taxes  on  vessel  tonnage,  Ship 
Subsidies,  etc.  So  far  as  natural  waterways  are  used,  especially 
where  the  maintenance  and  improvement  expense  is  small,  as  com- 
pared with  the  tonnage,  the  cost  is  very  low. 

The  economy  resulting  from  the  use  of  large  units  is  particu- 
larly great  in  the  handling  of  heavy  and  bulky  commodities  moving 
in  large  quantities.  Thus,  coal,  iron  ore,  grain,  barrelled  freights, 
baled  freight,  such  as  cotton,  wool  and  cloth — can  all  be  handled 
with  modern  machinery  at  a  minimum  of  expense  at  points  where 
special  machinery  or  facilities  for  such  handling  exist.  But  where 
the  lack  of  such  facilities  or  the  character  of  the  freight  call  for  a 
great  deal  of  manual  labor,  the  economy  of  water  transportation 
may  be  readily  absorbed  or  even  overbalanced  by  the  expense  of 
handling  on  and  ofif  the  vessel,  and  the  more  expensive  but  more 
flexible  rail  transportation  becomes  more  advantageous. 

Occasionally,  we  read  a  wonderful  tale  of  the  economy  of  water 
transportation.  Thus,  we  are  told  of  a  string  of  coal  barges  towed 
with  the  current  down  the  Ohio  and  Mississippi  rivers  from  the  coal 
fields  in  Pennsylvania  to  the  market  in  New  Orleans.  The  bare 
cost  of  such  transportation  is  a  mere  nothing.  It  is  as  if  we  should 
compare  the  cost  of  moving  a  5,000  or  7,000-ton  train  down  grade 
from  the  mines  to  tidewater,  as  has  been  done  in  special  cases,  with 
the  average  cost  of  operating  the  railroad.  The  expense  of  bring- 
ing back  the  boats  up  the  stream  is  as  much  an  element  of  the  cost 
of  the  service  rendered  as  the  return  of  the  cars  is  on  the  railway. 


NATIONAL     BUSINESS     CONGRESS  161 

The  cost  of  service  the  year  round,  under  unfavorable  as  well  as 
favorable  conditions,  must  be  taken  into  consideration  in  determin- 
ing the  average  cost  of  any  form  of  transportation. 

On  a  railway,  the  maintenance  of  the  roadbed  and  equipment 
and  the  general  expenses  of  administration,  absorb  65%  of  the  costs 
of  operation;  only  35%  (represented  by  Transportation  Expenses) 
are  required  to  pay  for  the  actual  movement  of  the  trains.  In 
Water  transportation,  as  already  pointed  out,  by  far  the  largest  por- 
tion of  the  Maintenance  Expense  is  paid  for  out  of  public  funds. 
Even  the  interest  on  the  public  moneys  invested  in  the  waterway  im- 
provements is  borne  by  the  whole  people,  and  is  not  generally  con- 
sidered as  a  part  of  the  cost  of  Water  transportation.  Only  a  care- 
ful studv  of  all  the  facts  and  the  proper  consideration  of  all  the  ele- 
ments of  ultimate  cost  can  determine  whether  inland  transportation 
bv  Water  or  Rail  is  in  reality  the  cheaper. 

In  many  cases,  however,  there  is  no  choice.  Our  Trans-ocean 
traffic  can  be  moved  only  by  vessel,  and  our  Transcontinental  traffic 
can  be  moved  only  by  rail.  In  the  case  of  Coastwise  business,  there 
is  a  choice,  and  the  advantages  of  water  transportation  for  the  heavy 
and  bulky  freights,  not  requiring  costly  distribution,  are  at  once  ap- 
parent. Where  Rail  transportation  gains  the  advantage,  it  is  wholly 
bv  reason  of  its  smaller  units  and  its  greater  flexibility  of  distri- 
bution. 

When  it  comes  to  interior  transportation,  there  is  obviously  an 
opportunity  for  a  difference  of  opinion.  Here  the  honest,  dispas- 
sionate citizen,  the  true  statesman,  the  intelligent  engineer — de- 
mand the  fullest  information.  They  want  all  the  facts,  and  they 
want  them  stated  without  partiality  or  bias. 

It  is  necessary  to  the  life  of  the  business  that  in  the  case  of  Rail 
transportation,  the  carrier  should  include  in  his  rates  the  cost  of 
transportation,  a  fair  allowance  for  the  up-keep  of  his  property, 
taxes,  insurance,  and  a  reasonable  profit  on  the  money  invested  in 
the  undertaking;  but  in  Water  transportation,  many  of  these  ex- 
penses are  borne  as  a  public  charge.  In  the  case  of  artificial  water- 
ways, interest  on  the  first  cost  alone,  when  divided  by  the  tonnage 
handled,  amounts  to  a  very  substantial  figure.  The  disregarding 
of  this  element  of  cost  in  some  cases  is  justifiable;  in  other  cases, 
not.     Xo  general  rule  can  be  laid  down. 


162  NATIONAL     BUSINESS     CONGRESS 

There  is  always  danger  in  letting  such  questions  be  settled  by 
sentimental  or  prejudiced  considerations.  Thus,  the  writer  heard 
a  leader  in  Congress  and  the  Governor  of  one  of  our  greatest  states 
say  that  the  expenditures  of  public  funds  in  enormous  amounts  on 
the  improvement  of  great  rivers  was  justified,  even  though  not  one 
ton  of  freight  availed  itself  of  the  facilities  created.  This  is  the 
most  common  and  probably  the  most  effective  argument  in  favor  of 
internal  waterway  development,  but  is  this  good  sense?  Is  it  good 
economics  ?  Let  us  not  lose  our  heads  in  the  discussion  of  questions 
of  such  grave  economic  importance,  but  give  thoughtful  considera- 
tion to  the  actual  facts  as  they  really  exist  and  as  they  affect  the 
good  of  the  whole  people. 

That  railway  managements,  like  other  commercial  undertakings, 
realize  the  force  of  the  principle  that  "half  a  loaf  is  better  than  no 
bread,"  goes  without  saying.  It  is  no  argument  against  a  railway 
corporation  that  rates  in  territory  parallel  to  or  competing  with 
water  transportation  are  lower  than  those  where  such  competition 
does  not  exist.  It  would  be  equally  true  if  the  government  under- 
took the  manufacture  or  sale  of  any  commodity  without  profit  or  at 
less  than  cost,  it  would  break  the  price  of  that  commodity ;  and  it  is 
equally  true  that  the  manufacturer  or  merchant  who,  by  reason  of 
government  competition  had  to  sacrifice  a  large  share  of  his  profit 
on  the  sale  of  some  commodities,  would  be  compelled  to  average  up 
by  making  a  larger  profit  on  the  remainder  of  his  business. 

Many  waterway  improvements  are  justifiable.  The  moderate 
deepening  of  a  large  river  system,  so  as  to  give  river  barges  their 
greatest  range  of  operation,  is  decidedly  desirable.  The  Mississippi 
river  and  its  tributaries  can  be  made  available  for  a  standard  type 
of  craft,  say  1,500-ton  barges  having  a  draught  of  from  3  to  6  feet, 
and  serve  thereby  a  mileage  of  16,630  miles.  The  question  of  the 
best  available  depth,  size  of  boat,  etc.,  is  like  the  question  of  the 
gauges  on  the  railways.  Over  50  gauges  have  been  tried,  but  the 
old  English  w^agon  gauge  of  4'8>4",  first  adopted  by  Stephenson,  has 
become  well  nigh  universal.  Much  of  the  business  of  the  country 
could  be  done  more  economically  on  a  six-foot  gauge,  or  even  on  the 
seven-foot  gauge  recommended  by  the  far-seeing  Brunei,  the  engi- 
neer of  the  Great  Western  Railway  of  England,  and  the  builder  of 
the  "Great  Eastern,"  but  the  advantage  of  a  uniform  standard  over 
an  entire  continent  outweighs  the  special  advantages  of  a  locality. 


NATIONAL     BUSINESS     CONGRESS 163 

IV-B. 

In  the  Case  of  Raihvay  Transportation,  it  is  obvious  that  its 
field  is  more  restricted  where  it  comes  in  direct  competition  with 
water  transportation  than  where  it  has  the  field  to  itself. 

In  the  United  States,  more  than  in  any  other  country,  wholesale 
and  long  distance  rates  have  been  made  with  the  idea  of  developing 
business.  This  is  instanced  by  our  Commodity  rates,  our  Transit 
and  Fabrication  rates,  and  our  low  carload  rates,  as  compared  with 
L.  C.  L.  rates. 

Sometimes  it  is  argued  that  railways  have  gone  too  far;  and, 
doubtless,  they  have  gone  farther  than  a  benevolent  despot  would 
have  gone  had  he  considered  the  benefit  of  the  community  as  a 
whole  and  the  railways  as  a  whole.  Each  railway  fought  for  its 
own  territory. 

Railways,  more  than  any  other  form  of  transportation,  have 
broken  down  distance.  They  have  put  the  distant  producing  center 
practically  on  a  parity  with  that  near-by.  In  doing  this,  they  have 
broken  down  monopoly,  and  have  fostered  competition.  A  man's 
dinner  table  is  supplied  with  food  from  a  range  of  easily  500  to 
3,000  miles,  and  he  is  scarcely  aware  of  it.  There  is  not  a  large  city 
that  could  exist  a  week  without  transportation,  so  dependent  have 
we  become  upon  distant  sources  of  production. 

An  important  feature  of  railway  transportation  which  is  not  a 
characteristic  of  any  other  form  of  transportation  is  that  it  is  solely 
and  exclusively  a  public  service,  regulated  by  public  authority  in  all 
countries  where  the  railways  are  not  actually  owned  as  well  as 
managed  by  the  government.  In  other  words,  carriage — or  "vect- 
ure,"  as  Bacon  called  it — by  rail  is  only  by  a  "common  carrier," 
whereas  a  very  large  part  of  the  carriage  by  water  and  highway  is 
not  by  the  "common  carrier,"  but  by  the  private  carrier,  the  "char- 
tered carrier,"  the  owner  of  the  freight.  The  Interstate  Commerce 
Commission  of  the  United  States  takes  very  serious  exception  (and 
properly  so,  I  think)  if  the  carrier  has  an  ownership  or  an  interest 
in  the  freight  he  transports,  and  yet  in  the  case  of  both  water  and 
highway  transportation,  that  condition  of  aflfairs  is  the  rule,  rather 
than  the  exception. 

The  cost  of  rail  transportation  is  often  quoted  at  something 
over  "seven  mills  per  ton  mile.  This  oft  quoted,  but  misleading 
figure,  represents  the  average  rate  over  the  entire  railway  mileage 


164  NATIONAL     BUSINESS     CONGRESS 

of  the  country — over  240,000  miles.  It  is  a  rate  arrived  at  regard- 
less of  commodity,  distance  hauled,  service  rendered,  etc. ;  a  sort  of 
higgledy-piggledy  averaging  of  oranges,  apples,  metals,  turnips  and 
coal. 

To  compare  Rail  rates  with  Water  or  Highway  rates,  it  is  im- 
portant to  compare  rates  for  similar  distances  and  on  similar  com- 
modities, and  to  add  in  the  case  of  Water  rates,  the  money  expended 
from  public  funds.  The  terminal  expenses  are  important  in  any 
case,  and  it  makes  a  good  deal  of  difference  whether  they  are  spread 
over  a  distance  of  100  or  of  1,000  miles.  Obviously,  the  carriage  of 
heavy  bulk  freights  by  water  can  not  be  compared  with  the  carriage 
of  high-class  commodities  over  mountain  ranges.  The  character  of 
the  service  must  be  taken  into  consideration. 

The  force  necessary  to  pull  a  given  load  on  a  railway  track  has 
been  accurately  determined.  Similar  information  with  respect  to 
the  movement  of  canal  boats  and  sea-going  vessels  has  been  worked 
out,  but  the  data  regarding  it  are  less  available  and  complete.  In  a 
general  way,  it  may  be  stated  that  in  the  case  of  Rail  transportation, 
the  power  required  to  overcome  the  resistance  increases  moderately 
as  the  speed  increases,  whereas,  in  the  case  of  the  vessel  moving 
through  water,  the  power  necessary  to  overcome  the  resistance  in- 
creases rapidly  with  each  increment  of  speed. 

While  it  appears  that  the  power  necessary  to  move  a  given  load 
through  slack  water  is  less  than  that  required  to  move  a  similar  load, 
mounted  on  wheels,  on  a  smooth  and  level  track,  this  fact  applies 
only  to  loads  moving  at  speeds  of  less  than  four  miles  per  hour.  At 
speeds  above  four  miles  per  hour,  Rail  transportation  gains  rapidly 
in  economy  of  power  required,  in  comparison  with  Water  transpor- 
tation. This  does  not  mean  that  Water  transportation  must  neces- 
sarily be  limited  to  speeds  as  low  as  four  miles  per  hour  any  more 
than  it  means  that  the  speed  of  railroad  trains  must  necessarily  be 
limited  to  their  most  economical  limit  (approximately  ten  miles  per 
hour),  but  it  does  illustrate  the  limitations  of  the  diflferent  modes  of 
transportation  and  the  field  properly  occupied  by  each. 

IV-C. 

Highzvay  or  Street  Transportation.  This  is  the  oldest  form  of 
transportation,  yet  the  one  which  today  has  received  the  least  public 
consideration  as  an  economic  question.     Perhaps  this  is  because  it 


NATIONAL     BUSINESS     CONGRESS  165 

is  so  much  a  public  question  that  "What  is  everybody's  business,  is 
nobody's  business."  To  me,  it  appears  evident  that  as  the  cost  of 
gathering  and  distributing  the  freight  to  and  from  the  railway  is  fre- 
quently quite  as  much  as  the  railway  freight  charge  (and,  in  the 
aggregate,  the  total  is  probably  greater),  it  must  follow  that  a  reduc- 
tion of  this  cost  is  just  as  important  and  far-reaching  as  a  reduction 
in  freight  rates. 

Here  is  a  subject  which,  scientifically,  is  in  its  infancy;  little  or 
no  data  are  to  be  found,  at  least  in  this  country,  on  the  subject  of  the 
cost  of  drayage,  and  the  wages  in  this  country  are  so  much  higher 
than  in  Europe,  that  European  experience  is  of  little  value.  How- 
ever, we  do  realize  that  better  roads  and  large  units  will  produce 
some  marked  economies ;  and  yet,  in  this  great  State  of  Illinois,  the 
question  of  highway  improvement  is  still,  to  all  appearances,  con- 
sidered to  be  of  very  minor  importance.  To  my  mind,  no  more  im- 
portant work  awaits  the  men  of  this  organization  than  the  study  of 
the  question  of  highway  and  street  transportation,  to  determine  the 
part  it  plays  in  the  cost  of  our  food  and  clothing;  in  short,  of  our 
cost  of  living.  Much  attention  has  been  paid  to  railway  and  water 
transportation ;  very  little  to  highway  and  street  transportation ;  yet 
it  can  be  shown  that  in  many  cases  the  latter  is  quite  as  much  a  pub- 
lic question  as  the  former. 

Conclusion.  The  question  of  the  cost  of  transportation  to  the 
public  must  be  studied  in  its  entirety  in  order  to  reach  any  sound 
conclusion  as  to  its  effect  upon  the  community  as  a  whole.  It  is  not 
sufficient  to  analyze  only  one  branch  of  the  subject  and  disregard  the 
others.  The  co-relation  of  the  various  methods  must  be  thoroughly 
understood  in  order  to  secure  from  each  of  them  the  greatest  bene- 
fits which  it  is  capable  of  conferring.     (Applause.) 

The  Chairman  :  Gentlemen,  this  address  is  now  open  for 
discussion,  but  we  have  so  much  before  us  this  morning  we  must 
get  the  work  off  our  hands  in  order  to  give  the  Resolutions  Com- 
mittee an  opportunity  this  afternoon,  so  the  Chair  will  have  to 
limit  the  debate,  whatever  there  is,  to  five  minutes.  Is  there  anyone 
who  would  like  to  speak  in  relation  to  this  address?  If  so,  the  op- 
portunity is  now  here. 

The  Department  of  State,  at  Washington,  has  honored  this  Con- 
gress by  sending  as  its  representative  a  leading  ofificial  whose  achieve- 
ments for  the  advancement  of  our  foreign  trade  are  a  matter  of  gen- 


166  NATIONAL     BUSINESS     CONGRESS 

eral  knowledge  to  American  exporters.  It  is  my  pleasure  to  pre- 
sent Honorable  John  Ball  Osborne,  Chief  of  the  Bureau  of  Trade 
Relations.     (Applause.) 

OUR  REFORMED  CONSULAR  SERVICE  AS  AN 
AGENCY  IN  AMERICAN  TRADE  EXPANSION. 

Mr.  Chairman,  and  Gentlemen  of  the  National  Business  Con- 
gress :  I  highly  appreciate  and  thank  you  for  the  honor  conferred 
in  inviting  me  to  address  the  National  Business  Congress.  Secre- 
tary Knox  has  been  so  kind  as  to  designate  me  to  represent  the  De- 
partment of  State  in  your  sessions,  and  I  take  pleasure  in  express- 
ing the  Department's  sense  of  appreciation  of  the  importance  and 
helpfulness  to  the  cause  of  American  commercial  expansion  of  meet- 
ings of  this  kind.  As  you  are  aware,  the  Department  of  State,  un- 
der the  able  direction  of  Secretary  Knox,  has,  in  the  last  few  years, 
taken  a  more  active  part  in  the  promotion  of  our  foreign  trade  than 
ever  before,  and  hence  it  is  keenly  and  sympathetically  interested 
in  your  present  discussions.  This  great  trade  policy  of  Secretary 
Knox  has  been  made  possible  by  the  wise  liberality  of  the  Congress 
of  the  United  States  in  generous  appropriations,  and  it  owes  no 
little  of  its  success  to  that  energetic  citizen  of  Chicago,  Assistant 
Secretary'  Huntington  Wilson. 

My  first  intention  was  to  give  you  a  general  description  of  the 
trade  promoting  institutions  of  the  National  Government ;  but  when 
I  reflected  that  this  Congress  is  held  under  the  auspices  of  the  Na- 
tional Business  League  of  America,  I  decided  to  specialize  on  some 
phase  in  respect  to  which  I  might  hope  to  bring  at  least  a  little  genu- 
ine information,  for  if  there  is  one  organization  in  the  country 
whose  members  keep  thoroughly  abreast  of  the  activities  of  our 
Government  in  behalf  of  foreign  commerce  it  is  the  National  Busi- 
ness League  of  America.  I  presume  that  this  intelligent  familiarity 
is  largely  due  to  the  efficiency  of  your  executive  officers,  but  it  is 
surely  due  in  some  measure  to  the  spirit  of  indomitable  energy  and 
unceasing  progress  that  animates  the  great  industrial  forces  of  Chi- 
cago and  the  entire  Middle  West. 

INTEREST  OF  BUSINESS  PUBLIC  IN  THE  SERVICE. 

I  have  taken  as  the  subject  of  my  remarks  today,  "Our  Re- 
formed Consular  Service  as  an  Agency  in  American  Trade  Expan- 


NATIONAL     BUSINESS     CONGRESS  167 


sion,"  which  topic  will  give  me  an  excuse  to  talk  shop,  as  well  as 
to  contrast  present  conditions  with  those  that  existed  when  I  was 
a  Consul  twenty-odd  years  ago.  With  the  single  exception  of  the 
postal  service,  there  is  no  branch  of  the  National  Government  in 
whose  efficiency  the  trade  interests  of  the  country  are  more  deeply 
concerned  than  in  that  of  the  Consular  Service.  This  concern,  how- 
ever, has  not  always  been  manifest,  and  it  is  only  in  recent  years 
that  our  manufacturers  and  exporters  have  come  to  realize  the  po- 
tential usefulness  to  them  of  this  governmental  agency,  with  the  re- 
sult that  now  each  year  it  is  utilized  to  greater  advantage  by  an 
increasing  number  of  business  concerns.  I  shall  presently  offer  a 
few  suggestions  as  to  how  you  may  best  avail  yourselves  of  the  ex- 
cellent facilities  now  offered  by  the  Consular  Service. 

CONDITIONS  UNDER  THE  SPOILS  SYSTEM. 

In  order  to  fully  appreciate  the  value  of  the  reorganized  serv- 
ice to  the  business  interests  of  the  United  States,  it  is  well  to  recall 
the  conditions  that  existed  prior  to  1906.  Consulships  have  always 
possessed  a  peculiar  fascination  to  officeseekers  and,  under  the  old 
system,  they  were  filled  by  all  sorts  and  conditions  of  men,  rang- 
ing from  distinguished  litterateurs,  military  men  and  retired  states- 
men to  ward  politicians,  bankrupt  business  men,  professional  fail- 
ures, individuals  in  quest  of  a  genial  climate,  and  adventurers  of  vari- 
ous kinds.  While  there  was  always  a  respectable  leaven  of  edu- 
cated, capable,  and  worthy  consuls,  there  were  many  totally  unfit 
for  the  office,  which  has  always  been  one  of  responsibility  and  dig- 
nity, calling  for  the  highest  type  of  American  citizenship. 

'  For  good  and  bad  alike,  the  supreme  test  in  making  appoint- 
ments was  the  strength  of  the  candidate's  political  influence.  No 
education  or  training  was  required,  and  the  so-called  instruction 
period  of  thirty  days  meant  nothing.  When  the  average  consul 
arrived  at  his  post  he  found  that  there  was  actually  no  opportunity 
for  advancement  as  a  reward  for  faithful  work,  and,  seeing  no  prob- 
ability of  retention  beyond  four  years,  many  set  out  to  systematically 
exploit  the  office  financially.  The  salaries  were,  as  a  rule,  so  in- 
adequate as  to  make  the  notarial  fees  essential  for  a  decent  living, 
and  there  being  no  inspection  system  many  abuses  grew  up. 

Euf  perhaps  the  worst  feature  of  the  old  service  was  the  noto- 
rious insecuritv  of  tenure  for  good  and  bad  alike.     A  clean  sweep 


168  NATIONAL    BUSINESS    CONGRESS 

at  each  change  of  the  party  in  power  was  the  rule,  while  every  new 
administration  of  the  same  party  involved  some  removals.  At  every 
such  clean  sweep  a  set  of  fairly  experienced  men  gave  way  to  a  has- 
tily selected  set  of  new  men,  to  the  serious  detriment  of  both  the 
service  and  the  business  interests  of  this  country.  During  the  first 
year  of  his  administration  President  Harrison  made  changes  in  most 
of  the  consulships  considered  worth  having.  During  the  first  year 
of  President  Cleveland's  administration  the  clean  sweep  came  into 
full  operation.  Within  a  period  of  less  than  ten  months  thirty  out 
of  a  total  of  thirty-five  consuls-general  and  133  out  of  a  total  of 
183  consuls  of  the  first  class,  besides  the  great  majority  of  the  minor 
consuls,  were  superseded  and  their  places  filled  by  hastily  selected 
Democrats.  A  similar  course  was  followed  by  President  McKinley. 
During  the  period  from  March  4,  1897,  to  November  1,  1898,  the 
changes  in  all  grades  above  and  including  consulships  at  $1,000 
aggregated  238  out  of  a  total  of  272  officers.  At  the  close  of  each 
of  the  administrations  mentioned  only  a  handful  of  representatives 
of  the  minority  party  survived  in  office. 

REORGANIZATION  ACT  OF  1906. 

Fortunately  the  era  of  the  clean  sweep  has  gone  forever.  Since 
1906  the  Consular  Service  has  been  thoroughly  reorganized  and 
placed  upon  a  strictly  non-partisan  merit  basis.  The  changes  ef- 
fected are  so  recent  and  the  National  Business  League  of  America 
contributed  so  much  to  bringing  them  about  that  it  is  unnecessary 
to  describe  them  in  detail.  You  will  recall  that  the  Reorganization 
Act  of  April  5,  1906,  reformed  the  system  along  structural  lines.  It 
regraded  all  consuls-general  and  consuls  and  readjusted  their  sala- 
ries on  an  equitable  basis ;  provided  a  system  of  regular  inspection 
of  consular  offices  by  a  corps  of  consuls-general  at  large  appointed 
from  the  service;  Americanized  the  service  by  requiring  not  only 
the  consuls,  but  their  clerks,  excepting  those  with  salaries  lower 
than  $1,000,  to  be  American  citizens;  extended  the  prohibition  to 
engage  in  trade  to  all  consular  officers  with  salaries  exceeding  $1,000, 
and  made  the  salaries  of  all  consuls-general  and  consuls  their  sole 
compensation  of  office  by  declaring  all  fees,  including  notarials,  offi- 
cial and  the  property  of  the  Government.  Each  of  these  legislative 
changes  represented  the  correction  of  a  specific  weakness  in  the  old 
system. 


NATIONAL     BUSINESS     CONGRESS  169 


You  will  also  recall  that  this  Reorganization  Aet  failed  to  go 
as  far  as  its  f ramers — Secretary  Root  and  Senator  Lodge — intended 
and  provided  in  the  bill  as  introduced,  which  had  contained  import- 
ant provisions  for  the  examination  of  candidates  for  admission  to 
the  service  by  a  specified  board  of  examiners,  the  definition  of  re- 
quired subjects  of  examination,  the  limitation  of  original  appoint- 
ments to  the  two  lowest  grades,  and  the  filling  of  vacancies  arising 
in  the  upper  grades  by  promotion  from  the  lower  grades  as  a  re- 
ward for  ability  and  efficiency  shown  in  the  service.  While  these 
meritorious  features  were  dropped  from  the  bill  before  its  enact- 
ment, they  were  promptly  put  into  operation  by  the  Executive  Order 
of  June  27,  1906,  and  have  ever  since  been  carried  out  strictly  and 
conscientiously  by  the  Department. 


REFORMS  BY   EXECUTIVE  ACTION. 

The  reorganized  service  now  comprises  57  consuls-general  and 
241  consuls,  or  a  total  of  298  principal  officers,  of  whom  60  are  con- 
suls in  class  8  at  $2,500,  and  45  consuls  in  class  9  at  $2,000,  the  two 
lowest  grades  to  which  original  appointments  are  confined.  The 
examinations  are  both  oral  and  written,  the  two  counting  equally. 
The  object  of  the  oral  examination  is  to  discover  the  candidate's 
business  ability,  alertness,  character,  address,  general  education,  and 
natural  fitness  for  the  service.  The  written  examination  covers 
eight  required  subjects,  namely:  a  modern  language;  natural,  indus- 
trial and  commercial  resources  of  the  United  States ;  political  econ- 
omy ;  international,  maritime  and  commercial  law ;  American  his- 
tor}%  government  and  institutions;  political  and  commercial  geogra- 
phy; arithmetic,  and  modern  history  of  Europe,  South  America  and 
the  Far  East.  Candidates  are  required  to  obtain  a  general  rating  of 
80  on  a  scale  of  100  in  order  to  be  eligible  for  certification.  They 
must  have  been  specially  designated  by  the  President  for  appoint- 
ment to  the  Consular  Service,  subject  to  examination.  They  must 
be  between  the  ages  of  21  and  50  years;  citizens  of  the  United 
States ;  of  good  character  and  habits ;  and  physically  and  mentally 
qualified  for  the  proper  performance  of  consular  work.  The  rule 
of  proportional  representation  of  all  the  states  and  territories  in  the 
Consular  Service  is  faithfullv  followed. 


170  NATIONAL    BUSINESS     CONGRESS 

CONSULAR  EXAMINATIONS  SINCE  1906. 

Under  the  new  system  there  have  been  14  examinations  held 
since  1906  for  consuls,  consular  assistants  and  student  interpreters. 
The  number  of  men  examined  was  388,  of  whom  174,  or  45  per 
cent,  received  the  required  passing  mark.  Of  these  successful  can- 
didates 133  received  appointments — 74  as  consuls  and  the  remainder 
as  consular  assistants  and  student  interpreters.  The  number  of  con- 
suls appointed  after  examination  since  1906  constitutes  25  per  cent 
of  the  principal  consular  officers.  It  is  an  interesting  fact  that  the 
statistics  of  these  examinations  demonstrate  completely  the  bona 
fides  of  the  system.  That  the  examinations  were  stringent  is  proved 
by  the  fact  that  55  per  cent  of  those  examined  failed  and  were  re- 
jected. That  appointments  were  made  on  a  strictly  non-partisan 
basis  is  proved  by  the  fact  that  of  the  74  consuls  36  were  from 
Northern  states  and  38  from  Southern  states.  The  Executive  Order 
of  1906  prescribes  that  neither  in  the  designation  for  examination 
or  certification  or  appointment  will  the  political  affiliations  of  the 
candidate  be  considered.  Hence,  information  respecting  this  mat- 
ter is  unknown  to  the  Department  of  State.  Another  fact  which 
shows  the  equitable  proportional  representation  of  consular  officers 
among  the  states  and  territories  is  that  of  the  74  consuls  referred 
to  48  are  from  states  east  of  the  Mississippi  and  26  from  states  and 
territories  west  of  that  river.  This  is  in  reasonable  proportion  with 
the  distribution  of  population,  according  to  the  census  of  1910,  70 
per  cent  of  our  population  lying  to  the  east  and  30  per  cent  to  the 
west  of  the  Mississippi,  It  may  also  be  added  that  the  133  persons 
appointed  to  consular  offices  as  the  result  of  these  examinations  rep- 
resented 39  states  and  territories  of  the  Union. 


THE  NEW  TYPE  OF  CONSUL. 

Just  a  word  as  to  the  educational  equipment  of  the  new  type 
of  consul.  In  the  earliest  examinations  under  the  new  regime  it 
was  noted  that  the  typical  candidate  was  much  the  same  as  under 
the  old  system;  but  there  has  been  a  change  for  the  better,  and  to- 
day the  men  designated  to  take  these  examinations  represent  a  very 
high  type.  This  is  because  the  difficult  character  of  the  examina- 
tions has  become  well  known  and  Senators  endeavor  to  recommend 
for  designation  only  those  likely  to  acquit  themselves  creditably. 


NATIONAL     BUSINESS     CONGRESS m 

While  the  possession  of  a  degree  is  not  required,  as  in  the  case  of 
France  for  admission  to  the  Foreign  Service,  it  will  be  perceived 
that  the  scope  of  the  examination  eliminates  men  of  deficient  educa- 
tion. The  examination  is  one  that  calls  for  a  liberal  education,  and 
about  75  per  cent  of  those  v^ho  have  passed  have  enjoyed  at  least 
some  college  experience,  most  of  them  holding  degrees.  This,  how- 
ever does  not  bar  the  young  man  who  gives  himself,  without  in- 
struction, the  substantial  equivalent  of  a  college  education. 

It  may  be  suggested  that  previous  business  training  and  experi- 
ence should  be  a  prerequisite  for  consular  appointment.  While  we 
all  recognize  the  immense  value  of  business  experience,  we  would 
not  wish  to  see  the  service  filled  up  with  business  inefficients  and 
bankrupts.  The  great  difficulty  is  to  induce  any  successful  business 
man  to  surrender  the  financial  potentialities  of  the  business  world 
for  the  consular  salaries  in  the  entrance  grades.  Fortunately,  how- 
ever, all  the  universities  and  colleges  of  the  country  are  making  their 
courses  of  study  more  practical  than  formerly,  and  hence  the  old 
idea  that  a  college  training  was  valueless  for  a  business  career  is 
no  longer  generally  held  in  the  business  world.  Here  in  the  Middle 
West,  where  you  have  such  excellent  state-aided  universities  as  Illi- 
nois and  Wisconsin,  and  generously  endowed  institutions  like  Chi- 
cago, with  their  thousands  of  students  in  attendance,  this  proposi- 
tion requires  no  argument.  The  typical  graduate  of  these  institu- 
tions is  splendid  material  for  the  making  of  a  good  consul. 


CONSULAR   EFFICIENCY   RECORDS. 

There  is  still  another  feature  of  the  reorganized  system  that 
should  be  borne  in  mind.  This  is  the  permanent  efficiency  record 
of  all  consular  officers  kept  in  the  Department  of  State  and  made 
up  from  all  sources  of  information  available  to  the  Department. 
One  of  the  most  irriportant  elements  of  this  record  is  the  character 
of  the  consuls'  reports  upon  the  trade  relations  of  the  United  States. 
This  record  is  consulted  by  the  Secretary  of  State  and  brought  to 
the  attention  of  the  President  in  determining  questions  as  to  reten- 
tion in.  office,  transfers,  and  promotions.  It  furnishes  the  strongest 
possible  incentive  to  all  consular  officers  to  render  meritorious  and 
valuable  ser\'ice  to  the  business  interests  of  the  United  States. 


172  NATIONAL     BUSINESS     CONGRESS 


THE  CONSULAR  SCHOOL  IN  THE  STATE  DEPARTMENT. 

Under  the  present  system  the  instruction  period  of  thirty  days 
allowed  by  law  to  newly  appointed  consuls  has  been  galvanized  into 
genuine  usefulness  by  the  Department  of  State.  During  this  period 
consuls  are  required  to  follow  systematic  instruction  under  official 
guidance.  Every  day  and  almost  every  hour  is  taken  up  in  studying 
the  consular  regulations  or  listening  to  addresses  by  bureau  chiefs 
of  the  Department  of  State  or  other  branches  of  the  executive  de- 
partments whose  work  pertains  to  consular  activities.  This  instruc- 
tion work  gives  the  consular  officers  an  intelligent  conception  of  the 
duties  they  are  about  to  undertake. 


TRADE  CONFERENCES  WITH  CONSULS  ON  LEAVE. 

Another  useful  innovation  introduced  by  the  Department  of 
State  since  last  August  is  the  plan  of  trade  conferences  between 
consular  officers  on  leave  in  the  United  States  and  the  business  men 
of  the  country.  Consuls  are  required  to  prepare  themselves  before 
going  on  leave  to  answer  accurately  such  practical  questions  as  the 
business  men  of  the  United  States  may  desire  to  ask  them  and  to 
notify  the  Department,  as  far  as  possible  in  advance,  of  the  probable 
dates  of  their  arrival  and  periods  of  stay  in  the  principal  business 
centers.  This  information  is  transmitted  by  the  State  Department 
to  the  Department  of  Commerce  and  Labor  and  is  published  in  the 
"Daily  Consular  and  Trade  Reports,"  in  order  that  business  organ- 
izations may  arrange  for  trade  conferences  with  the  consular  officers. 

SCOPE  OF  COMMERCIAL  SERVICES  OF  CONSULS. 

Let  us  now  consider  the  concrete  results  of  the  reformation  of 
the  Consular  Service  so  far  as  the  commerce  of  the  United  States 
is  concerned.  Consular  activities  in  this  field  may  be  conveniently 
divided  into  three  classes:  (1)  information  and  advice  furnished 
by  the  consular  officer  within  his  district,  either  at  the  consulate  or 
elsewhere;  (2)  information  and  advice  furnished  by  the  consular 
officer  in  correspondence  in  response  to  inquiries  from  the  Ameri- 
can business  public;  (3)  reports  to  the  Department  of  State  on 
commercial  and  industrial  conditions  in  foreign  countries  and  open- 
ings for  American  trade  development. 


NATIONAL     BUSINESS     CONGRESS  173 


(1)  IN  THE  CONSULAR  DISTRICT. 

Consular  officers  are  expected  to  cultivate  friendly  relations  with 
the  merchants  and  importers  of  their  districts,  as  well  as  with  the 
commercial  authorities  of  the  place,  so  that  they  may  keep  in  close 
touch  with  the  market  conditions  and  opportunities  for  the  introduc- 
tion of  American  goods,  and  so  that  when  trade  information  is  de- 
sired it  may  be  more  readily  obtained.  To  this  end  consuls  some- 
times join  the  local  chamber  of  commerce  and  attend  regularly  its 
meetings.  They  often  inform  the  local  business  public,  sometimes 
through  the  medium  of  the  press,  that  the  consulate  is  ready  to  an- 
swer inquiries  in  regard  to  American  products.  Some  consuls, 
where  their  other  duties  do  not  conflict,  make  a  practice  of  visiting 
local  business  houses  in  order  to  discuss  conditions  relating  to  trade 
with  the  United  States  and  to  endeavor  to  impress  the  importers 
with  the  superiority  of  American  goods. 

All  consular  officers  are  required  to  keep  on  file  the  catalogs 
and  other  trade  literature  sent  to  them  by  American  manufacturers 
and  exporters  with  a  request  to  that  effect.  When  requested  to  do 
so  by  the  senders,  most  consuls  cheerfully  transmit  catalogs  and 
circulars  to  local  firms  which  are  likely  to  be  interested  in  the  con- 
tents. The  best  regulated  offices  in  the  service  keep  the  catalogs  on 
file,  arranged  and  indexed  so  as  to  be  readily  accessible  in  case  of 
local  inquiries. 

Nearly  all  the  leading  trade  journals  of  the  United  States  are 
furnished  gratuitously  to  the  consular  offices  throughout  the  world 
and  are  kept  on  file  in  a  place  in  the  consulate  set  aside  for  the 
purpose.  Frequently  consuls  when  buying  goods  make  a  point  of 
asking  for  American-made  articles  and  speaking  of  their  superiority, 
good  qualities,  etc. 

All  consuls  are  expected  to  afford  proper  assistance  by  advice 
and  information  to  American  salesmen,  putting  them  into  touch  with 
local  buyers  whenever  possible.  As  regards  samples  of  American 
goods  received  by  the  consular  officers,  some  consuls  make  a  prac- 
tice of  handing  these  samples  to  firms  known  to  be  interested  in 
the  particular  line  of  goods.  Countless  instances  of  the  establish- 
ment in  foreign  countries  of  agencies  for  American  products  through 
the  endeavors  of  consular  officers  have  been  brought  to  the  atten- 
tion of  the  Department. 


174  NATIONAL     BUSINESS     CONGRESS 

The  following  statement  was  recently  made  by  an  American 
consul  in  the  Far  East  in  respect  to  the  steps  taken  by  him  toward 
the  extension  of  American  trade  in  his  consular  district: 

'T  have  made  careful  inquiries  into  possibilities  of  American 
trade  and  have  informed  the  exporters  in  the  United  States  accord- 
ingly. 

"I  have  personally  induced  local  importers  to  carry  American 
goods  by  supplying  them  with  samples  and  explaining  the  merits  of 
the  American  product. 

"I  have  also  placed  American  catalogs  and  trade  publications 
with  the  leading  importers,  supplying  them  with  general  information 
from  time  to  time  calculated  to  promote  American  trade  at  this  port. 

"I  have  furnished  a  commercial  exhibit  room  at  this  consulate, 
placing  trade  literature  and  samples  there,  and  informed  the  local 
chamber  of  commerce  of  this  fact,  inviting  its  members  to  avail 
themselves  of  its  advantages  and  explaining  that  an  interpreter  is 
detailed  to  explain  such  features  as  may  interest  them  rrtost. 

"I  have  supplied  the  local  chamber  of  commerce  with  copies  of 
American  trade  publications. 

"I  have  reported  to  the  Department  of  State  from  time  to  time 
with  regard  to  the  commercial  situation  at  this  port  and  opportuni- 
ties for  American  trade  in  this  district. 

"I  have  discovered  various  imitations  of  American  trade  marks 
with  a  view  to  preventing  the  same." 

(2)  CONSULAR  TRADE  CORRESPONDENCE. 

One  significant  measure  of  the  increased  usefulness  of  the  new 
consular  service  is  the  growth  in  volume  of  trade  correspondence 
between  consular  officers  and  inquirers  in  the  United  States,  most 
of  which  passes  through  the  Bureau  of  Trade  Relations  of  the 
Department  of  State.  In  the  calendar  year  1910,  about  14,000  such 
letters  from  the  consuls  passed  through  the  bureau  mentioned,  while 
in  the  past  eleven  months  of  the  present  calendar  year,  the  number 
has  closely  approximated  16,000.  They  dealt  with  every  phase  of 
our  trade  relations  and,  being  answers  to  practical  questions  of  prac- 
tical business  men,  they  contained  valuable  information,  much  of 
which  was  made  available  to  others  interested  in  the  subject  through 
data  furnished  by  the  Bureau  of  Trade  Relations  to  the  Bureau  of 
Manufactures  of   the   Department   of   Commerce   and   Labor,   the 


NATIONAL    BUSINESS    CONGRESS  175 


identity  of  the  American  inquirers  being,  of  course,  kept  confiden- 
tial. This  system  has  given  the  maximum  of  commercial  utility  to 
this  branch  of  consular  work. 

In  general,  it  may  be  said  that  consular  officers  are  expected  to 
answer  concisely,  promptly  and  accurately,  requests  for  legitimate 
business  information,  so  far  as  practicable  and  consistent  with  the 
discharge  of  other  duties  imposed  upon  them  by  law.  They  are  ex- 
pected, therefore,  to  give  advice  and  counsel  to  American  firms  who 
are  endeavoring  to  build  up  a  foreign  trade,  and  they  frequently 
direct  attention  to  defective  methods  pursued  and  suggest  remedies. 
They  give  careful  attention  to  requests  from  American  concerns  for 
names  of  local  firms  in  good  standing  or  with  special  facilities  for 
doing  commission  business. 

(3)  COMMERCIAL  REPORTS  TO  THE  DEPARTMENT  OF  STATE 

Another  striking  evidence  of  the  improvement  in  the  consular 
service  is  the  growth  in  the  consular  trade  reports  and  a  general  im- 
provement in  their  quality.  The  number  of  these  reports  handled 
annually  by  the  Department,  has  increased  from  about  4,000  in  the 
fiscal  year  1904,  to  nearly  20,000  in  1911.  The  latter  number,  how- 
ever, includes  copies  of  certain  trade  letters.  The  reports  proper 
now  average  about  10,000  a  year. 

These  trade  reports  are  made  partly  in  answer  to  instructions 
of  the  Department,  and  partly  on  the  initiative  of  the  consular 
officers.  They  are  all  carefully  edited  in  the  Department  of  State 
and  then  transmitted  to  the  Department  of  Commerce  and  Labor 
with  a  view  to  their  publication  in  the  "Daily  Consular  and  Trade 
Reports,"  or  their  dissemination  among  selected  American  manu- 
facturers through  the  medium  of  confidential  bulletins. 

Besides  an  annual  report  on  the  commerce  and  industries  of 
their  respective  districts  for  the  calendar  year,  all  consuls  are  re- 
quired to  answer,  with  reasonable  promptness  and  after  due  inquiry, 
all  instructions  of  the  Department  of  State  in  relation  to  trade  re- 
ports desired  for  publication  or  other  use.  They  are  urged  to  keep 
in  touch  with  the  industrial  and  commercial  situation  in  their  re- 
spective districts,  and  to  report  full  and  accurate  information  in  re- 
gard to  these  conditions,  with  special  reference  to  every  possible 
opening  for  American  trade  extension.  They  are  expected  to  offer 
suggestions  of  practical  value  for  the  increase  of  the  sales  of  Ameri- 


176  NATIONAL    BUSINESS     CONGRESS 

can  goods,  specifying  kinds  in  demand  and  methods  by  which 
American  firms  can  best  place  them  on  the  market.  Each  year  they 
are  required  to  send  a  complete  revised  list  of  the  local  importers 
and  dealers  of  their  districts  for  the  benefit  of  American  exporters. 
They  are  particularly  urged  to  exercise  the  utmost  vigilance  to  dis- 
cover and  report  foreign  trade  opportunities,  such  as  public  tenders 
for  supplies  and  improvements  and  private  enterprises,  care  being 
taken  to  report  only  propositions  that  are  represented  by  responsible 
persons.  In  cases  of  urgency  and  special  importance,  they  are  au- 
thorized to  report  trade  information  by  cable. 

CONCRETE  INSTANCES  OF  TRADE  EXTENSION. 

Many  concrete  instances  of  American  trade  extension  as  the 
direct  result  of  the  commercial  activities  of  our  consular  officers 
under  the  new  system  have  been  reported  to  the  Department.  On 
this  subject  Hon.  Wilbur  J.  Carr,  the  Director  of  the  Consular 
Service,  who  knows  accurately  more  about  its  activities  than  anyone 
else,  mentioned,  in  a  recent  address,  several  noteworthy  instances 
where  benefits  followed  from  trade  information  furnished  by  our 
consuls,  such  as  the  sale  of  100  miles  of  wire  fencing,  the  sale  in 
Siberia  of  sixteen  carloads  of  machinery  by  one  firm,  and  of  twenty 
carloads  of  diversified  manufactured  products  by  another  firm  in 
various  foreign  markets,  and  a  contract  for  a  half-million  dollar 
bridge. 

In  his  message  to  Congress  a  few  days  ago,  on  foreign  rela- 
tions. President  Taft  referred  to  the  fact  that  in  the  last  fiscal  year, 
for  the  first  time  in  our  history,  the  exports  of  domestic  merchan- 
dise exceeded  the  two  billion  dollar  mark,  being  an  increase  of  300 
million  dollars  over  the  figures  for  the  previous  year.  Another  in- 
teresting fact  is  that  the  present  indications  are  that  when  the  cur- 
rent calendar  year  is  completed,  our  exports  of  manufactured  goods 
will  have  approximately  reached,  if  not  surpassed,  a  valuation  for 
the  year  of  one  billion  dollars.  Manufactures  are  pre-eminently 
the  subject  matter  of  international  commercial  competition,  for  our 
staple  raw  materials  like  cotton,  wheat,  tobacco,  and  mineral  oil 
virtually  sell  themselves.  There  is  no  doubt  that  the  present  ener- 
getic trade  policy  of  the  Department  of  State  and  the  responsive 
efforts  of  the  consular  officers,  have  contributed  materially  to  the 
gratifying  expansion  in  our  export  trade  revealed  in  the  statistics 
mentioned. 


NATIONAL     BUSINESS     CONGRESS  177 

TESTIMONIAL  LETTERS  FROM  MANUFACTURERS. 

It  has  been  a  source  of  gratification  to  the  Department  of  State 
to  receive  letters  from  more  than  100  American  firms  that  have 
succeeded,  through  the  help  of  consular  officers,  in  obtaining  new 
or  wider  markets  for  their  products  in  foreign  countries.  Most  of 
these  commendatory  letters  specify  concrete  instances  of  American 
trade  extension  through  the  activities  of  the  Department  of  State, 
and  the  consuls.  I  have  thought  that  it  might  interest  you  to  hear 
some  literal  quotations  from  these  letters,  without  disclosure  of  the 
names  of  the  writers,  which  are  regarded  as  confidential.  All  the 
letters  from  which  I  quote,  were  received  by  the  Department  of 
State  in  the  present  year,  and  relate  to  actual  conditions  in  the 
service. 

A  piano  manufacturing  companv  writes  as  follows: 

"We  are  very  glad,  indeed,  to  have  the  opportunity  which  your 
letter  of  the  1st  gives  us,  to  express  our  appreciation  of  the  really 
invaluable  information  given  us  by  the  members  of  the  Consular 
Service  with  respect  to  the  local  conditions  in  various  parts  of  the 
world  attendant  upon  the  merchandising  of  pianos  and  player 
pianos.  Our  requests  for  information  have  invariably  resulted  sat- 
isfactorily to  us.  and  we  have  been  very  much  impressed  with  the 
efficiency  of  our  Consular  Service." 

A  manufacturing  company  of  Cincinnati,  writes : 

'■\\'e  are  pleased  to  report  that  the  Consular  Service  has  been 
very  helpful  to  us  in  our  efforts  to  build  up  a  larger  foreign  client- 
age. We  consider  the  publication  of  the  "Daily  Consular 
and  Trade  Reports,"  one  of  the  best  things  ever  oft'ered  to 
encourage  the  exporter.  Every  item  of  possible  interest  to  us  is 
promptly  and  persistently  followed  up,  with  the  result  that  we  have 
made  some  very  valuable  trade  connections.  We  also  frequently 
take  occasion  to  communicate  with  the  consuls  direct,  many  of 
whom  have  replied  offering  information  and  suggestions  from  which 
we  have  benefited  greatly.  This  very  week  we  have  entered  orders 
from  two  new  customers  in  South  America  whose  names  were  both 
furnished  by  consuls.'' 

Another  manufacturing  company  of  the  same  city,  writes: 

"Haying  carried  on  an  export  business  for  a  good  many  years, 
we  take  pleasure  in  stating  that  we  have  noticed  in  the  last  few  years 
a  decided  improvement  in  the  American  Consular  Service." 


178  NATIONAL    BUSINESS     CONGRESS 


A  manufacturing  company  of  Jersey  City,  writes: 

"We  have  a  feeling  that  within  the  past  few  years  the  United 
States  has  made  a  great  improvement  in  its  consuls;  that  the  con- 
suls are  much  better  equipped  as  business  men." 

A  manufacturing  company  of  New  York  City,  wTites : 

"It  is  a  special  pleasure  to  us  to  congratulate  you  upon  the 
efficiency  of  the  Consular  Service,  which  in  our  mind  is  unequalled 
and  which  cannot  be  too  highly  appreciated  by  all  American  manu- 
facturers working  for  export,  that  avail  themselves  in  an  intelligent 
manner  of  the  facilities  extended  to  them  by  this  service  and  that 
will  heed  the  indication  and  information  given  in  the  "Daily  Con- 
sular and  Trade  Reports''  to  further  the  growth  of  their  export 
business." 

An  American  safe  manufacturer  writes : 

"We  beg  to  state  that  the  results  obtained  thus  far  have  been 
quite  satisfactory,  and  the  service  rendered  by  the  consuls  at  the  dif- 
ferent posts  in  foreign  countries,  has  proved  of  inestimable  value 
to  the  development  of  our  export  trade." 

A  firm  of  New  York  City  writes : 

"We  can  answer  this  question  unqualifiedly,  that  we  have  de- 
rived a  very  considerable  benefit  from  such  reports,  and  that  we  find 
our  consuls,  as  a  rule,  are  not  only  able  but  very  willing  to  extend  to 
us  responses  to  requests  for  information  which  we  make  either 
direct  or  through  the  Department  of  State. 

"We  have  during  the  last  few  years,  seen  a  continuous  im- 
provement in  such  service  which  doubtless  implies  that  the  govern- 
ment is  very  materially  improving  such  service,  and  we  feel  that  the 
people  of  the  United  States,  as  a  whole,  and  the  manufacturers  par- 
ticularly, should  be  gratified  over  such  improvements." 

A  manufacturing  concern  in  Massachusetts,  writes: 

"An  immense  majority  of  the  reports  indicate  very  clearly  that 
the  consular  officer  made  a  careful  investigation  of  the  facts  before 
making  his  report.  The  accuracy  of  the  reported  facts,  and  the 
conclusions  reached  have  been  later  confirmed  in  several  instances, 
and  in  no  case  have  we  discovered  that  the  information  furnished 
was  inaccurate." 

A  Hartford  concern  writes : 

"We  beg  to  advise  that  we  appreciate  most  thoroughly  the 
work  the  American  consuls  have  been  doing  for  us  throughout  the 
world,  which  has  been  most  valuable." 


NATIONAL     BUSINESS     CONGRESS  179 

The  manager  of  an  Indiana  manufacturing  company,  writes: 

"I  desire  to  emphasize  the  fact  that  I  have  been  in  the  export 
business  for  years  and  I  have  had  the  opportunity  of  coming  in  con- 
tact with  consulates  in  all  corners  of  the  globe,  and  that  I  found 
that  the  personnel  of  the  consular  corps  has  been  brought  up  to  the 
standard  which  assures  the  American  manufacturers  of  assistance 
second  to  none.  I  know  full  well  that  no  one  can  build  up  an  ex- 
port trade  in  a  day  or  in  a  year,  but  only  by  persistent  hammering. 
I  could  name  a  few  consuls  who  have  gone  out  of  their  way  to 
assist  me  many  a  time.  I  have  asked  questions  which  they  were  not 
obliged  to  answer,  but  I  must  say  that  I  always  found  them  ready  to 
do  their  utmost  to  further  American  trade. 

"I  have  made  a  close  study  of  the  export  business  and  can  only 
say  that  the  American  manufacturer  who  gets  in  touch  with  our  con- 
suls has  no  cause  to  fear  that  other  people  will  get  better  assistance 
from  their  representatives  abroad  than  Americans  do.  Indeed, 
many  a  time  Englishmen  and  even  Germans  have  told  me  that  our 
consuls  did  wonderful  yeoman  service  for  our  business  houses,  and 
that  no  matter  what  they  tried,  other  nations  could  not  get  their 
consuls  to  give  equally  satisfactory  assistance." 

A  Chicago  firm  writes  : 

"We  are  much  pleased  with  the  courtesies  and  aid  given  us  in 
advancing  the  sale  of  our  products  in  foreign  markets,  and  we  are 
greatly  pleased  to  add  we  have  obtained  concrete  results  through 
the  medium  and  assistance  from  your  Consular  Service,  and  look 
forward  to  a  still  increasing  business." 

A  Michigan  firm  writes : 

"We  have  not  hesitated  in  the  least  to  call  upon  the  American 
consuls  for  help  and  they  have  not  only  responded  in  all  cases 
promptly  and  in  a  business-like  way,  but  they  all  seem  to  show  a 
great  interest  in  the  promotion  of  the  sale  of  American-made  goods 
in  foreign  countries.  We  can  not  say  too  much  for  the  service  we 
have  received." 

A  Detroit  firm  writes : 

"We  peruse  these  trade  reports  every  day  very  carefully,  as  we 
have  thousands  of  times  found  information  in  them  that  has  led  to 
large  sales.  In  fact,  in  one  instance,  we  were  given  through  these 
reports,  the  name  of  an  agent  who  came  here  to  the  United  States 
to  see  our  plant  and  investigate  our  products,  who  has  since  pur- 
chased twenty  thousand  dollars'  worth  of  motor  boats." 


180  NATIONAL     BUSINESS     CONGRESS 

A  New  Jersey  firm  writes: 

"From  (juite  a  number  of  American  consuls  we  have  received 
valuable  information  as  well  as  inquiries  that  have  led  to  business, 
and  we  believe  the  Consular  Service  will  prove  to  be  a  valuable  help 
to  the  American  manufacturer  seeking  to  extend  his  foreign  com- 
merce." 

A  Cincinnati  firm  writes : 

"We  have  used  this  service  considerably,  and  have  found  it 
most  excellent  and  constantly  improving.  The  letters  we  have  had 
from  American  consuls  all  over  the  world  within  the  past  two  years, 
have  given  us  very  complete  and  reliable  information  in  answers  to 
our  inquiries,  and  we  find  this  service  most  valuable  to  us." 

A  Minnesota  firm  writes : 

"Speaking  from  the  standpoint  of  the  manufacturer,  we  con- 
sider the  consular  service  one  of  our  most  available  assets  in  the 
development  of  foreign  trade.  It  is  through  their  offices  that  we 
learn  the  possible  markets  for  our  product;  it  is  through  them,  in 
most  part,  that  we  obtain  the  names  of  our  possible  customers ;  and 
it  is  through  the  high  personnel  of  this  service  that  we  have  found 
the  trade  abroad  inspired  with  confidence  in  American  goods. 

"While  millions  of  dollars  are  spent  annually  in  exploiting  for- 
eign fields  through  the  channels  of  advertising,  we  have  found  the 
most  efifective  results  in  the  assistance  rendered  by  our  consular 
offices. 

"It  is  the  one  force  today  that,  properly  strengthened,  is  capa- 
ble of  opening  the  markets  of  the  world  to  American  goods  in  pref- 
erence to  the  cheaper  products  of  competitive  nations,  and  in  work- 
ing out  reciprocal  tarifif  treaties  with  the  countries  of  all  America." 

A  Massachusetts  firm  writes : 

"We  would  say  that  the  service  is  of  much  material  benefit  to 
exporters  who  depend  entirely  upon  correspondence  to  make  busi- 
ness connections.  In  the  case  of  traveling  representatives,  we 
would  consider  that  the  consuls  would  be  of  far  greater  assistance  in 
securing  good  connections,  by  profitable  introductions  to  the  leading 
merchants  and  business  men  of  their  stations." 

A  Cincinnati  firm  writes : 

"In  general,  the  writer  believes  from  personal  experience  with 
very  many  of  our  consuls  abroad  that  the  personnel  of  our  consular 
organization  is  now  superior  to  that  of  any  other  country  in  the 


NATIONAL     BUSINESS     CONGRESS  181 

world  from  a  business  standpoint ;  in  fact,  he  knows  that  German 
importers  in  South  America  have  asked  that  their  own  service  be 
brous^ht  up  to  the  standard  of  ours,  and  one  has  only  to  pick  up  any 
1  British  export  trade  publication  to  find  complaints  from  Ijritish 
importers  abroad  as  to  the  relative  efficiency  of  their  own  and 
American  consuls." 

A  great  American  publishing  house  writes : 

"We  are  delighted  to  have  the  opportunity  to  say  to  you  that  a 
representative  from  our  house,  who  recently  made  a  trip  around 
South  America,  stopping  at  the  principal  cities,  met  without  excep- 
tion, with  most  courteous  treatment  and  w'ith  valuable  assistance 
every  time  he  called  upon  a  consular  representative  of  the  United 
States." 

An  important  manufacturing  company  in  New  York  City, 
writes : 

"All  we  can  say  is,  that  all  our  requests  to  various  consuls  have 
received  the  most  careful  attention  and  we  want  to  tender  our  con- 
gratulations to  the  department  in  maintaining  such  an  efficient  force 
of  clear-sighted  men. 

"We  deem  it  a  privilege  to  be  able  to  acknowledge  in  this  way 
our  gratitude  for  services  we  would  otherwise  be  unable  in  any  way 
to  obtain." 

HOW  TO   UTILIZE  THE  SERVICE. 

It  has  occurred  to  me  that  you  would  probably  like  to  have  some 
specific  suggestions  as  to  the  best  way  for  you  as  manufacturers  and 
exporters  to  make  use  of  the  improved  machinery  of  the  Depart- 
ment of  State  and  the  consular  service  for  the  promotion  of  your 
foreign  trade.     I  will  endeavor  to  make  them  as  concise  as  possible. 

(1)  If  your  firm  is  not  already  on  the  mailing  list  for  receipt 
of  the  "Daily  Consular  and  Trade  Reports,"  I  suggest  that  you  write 
at  once  to  the  Secretary  of  Commerce  and  Labor,  requesting  that 
your  name  be  so  listed  in  view  of  your  practical  interest  in  foreign 
trade  conditions. 

It  should  be  the  business  of  some  one  in  your  concern  to  regu- 
larly read  over  each  number  of  this  useful  publication  as  soon  as  it 
arrives,  with  special  reference  to  consular  reports  published  therein 
on  the  subjects  and  markets  in  which  you  are  interested  and  the 
foreign-  trade  opportunities  listed  in  that  department  of  the  publi- 
cation.    It  might  also  be  of  advantage  to  you  to  take  note  of  the 


182  NATIONAL    BUSINESS     CONGRESS 

expected  visits  to  your  coniniunity  of  American  consular  officers 
on  leave. 

(2)  If  you  desire  specific  information  in  relation  to  commer- 
cial or  industrial  conditions  in  foreign  countries,  I  suggest  that  you 
write  either  to  the  Department  of  State  or  the  Department  of  Com- 
merce and  Labor,  requesting  that  you  be  furnished  with  printed 
copies  of  such  consular  reports  or  other  data  as  are  available  on 
the  subject.  If  the  information  is  not  already  in  the  possession  of 
the  Government,  your  request  will  probably  be  made  the  subject  of 
an  instruction  from  the  Department  of  State  to  one  or  more  con- 
sular officers.  When  the  replies  are  received,  a  complete  set  of  the 
reports  will  be  transmitted  to  the  Department  of  Commerce  and 
Labor  for  possible  publication,  and  you  will  be  furnished  with 
copies. 

(3)  If  you  desire  any  specific  information  in  relation  to  your 
own  trade  in  a  particular  country,  in  respect  to  which  the  informa- 
tion on  file  would,  in  all  probability,  fail  to  be  completely  responsive, 
the  best  and  quickest  way  is  for  you  to  write  direct  to  the  American 
consul  in  the  appropriate  district.  Assuming  that  it  is  a  legitimate 
inquiry,  the  consul  will  at  once  investigate  the  matter  and  send  his 
reply  to  you  through  the  Department  of  State,  by  which  it  will  be 
transmitted  to  you  without  delay;  or,  inspired  by  your  letter  and 
perhaps  other  inquiries  along  the  same  lines,  the  consul  may,  at  his 
option,  make  a  report  to  the  Department  of  State  for  publication  by 
the  Department  of  Commerce  and  Labor  and  for  transmission  to 
you  as  one  of  the  inquirers. 

(4)  If  you  are  not  in  possession  of  an  accurate  list  of  Amer- 
ican consular  officers  I  suggest  that  you  write  for  the  same  to  the 
Department  of  State,  which  has  for  distribution  a  mailing  list  of 
these  officers. 

(5)  In  your  correspondence  with  American  consular  officers 
you  should  bear  in  mind  that  their  duties  are  multifarious  and  often 
extremely  difficult.  When  disturbed  political  conditions  prevail  in 
the  country  it  is  usually  impossible  for  the  consul  to  give  prompt 
attention  to  inquiries  about  trade,  for  the  protection  of  the  personal 
and  property  rights  of  American  citizens  must  take  precedence.  Be- 
fore complaining  of  the  neglect  of  a  consul  in  replying  to  your 
request  for  information  you  should  make  due  allowance  for  mail 


NATIONAL     BUSINESS     CONGRESS  183 

delays  and  a  reasonable  margin  for  inquiry,  and  perhaps  corre- 
spondence, by  the  consul  in  his  district.  You  should  also  be  care- 
ful to  prepay  in  full  the  proper  postage  on  your  own  letters  to  the 
consul ;  but  his  reply  will  come  to  you  through  the  Department  of 
State  without  any  cost  whatsoever  to  you. 

I  would  also  remind  you  that  consular  officers  must  not  be  re- 
garded as  spies  to  ferret  out  foreign  trade  secrets  or  as  commercial 
travelers  to  peddle  samples  or  distribute  trade  literature  indiscrimin- 
ately. Nothing  so  unreasonable  should  be  asked  of  officers  who  are 
expected  at  all  times  to  uphold  the  dignity  of  our  Government  and 
retain  the  respect  of  the  foreign  community.  Furthermore,  as  you 
are  all  doubtless  aware,  the  consular  officers  are  not  permitted  to 
report  to  private  inquirers  concerning  the  financial  standing  or  com- 
mercial repute  of  business  men  or  houses  in  their  districts,  although 
they  may  refer  such  inquirers  to  banks  or  other  business  agencies ; 
or  they  may  quote  the  ratings  of  local  business  agencies. 

(6)  If  you  are  not  already  in  possession  of  the  volume  known 
as  the  "World  Trade  Directory,"  published  in  1911  by  the  Depart- 
ment of  Commerce  and  Labor  and  containing  the  names  of  many 
thousand  dealers  and  importers  in  foreign  countries,  classified  by 
industries  and  products,  I  suggest  that  you  make  application  to  the 
public  printer  at  Washington  for  this  document,  which  is  sold  at  $5 
a  copy. 

I  understand  that  this  useful  publication  is  the  result  of  the 
recommendations  of  the  National  Business  League  of  America. 

(7)  While  it  is  not  practicable  for  American  manufacturers 
of  all  lines  to  send  abroad  American  salesmen  or  even  to  maintain 
foreign  agencies,  whenever  this  is  done  I  suggest  that  you  advise 
the  appropriate  consular  officer  of  the  fact,  in  order  that  he  may 
extend  such  aid  to  your  representative  as  is  possible  and  proper. 
Whenever  you  send  out  an  American  salesman  you  should  give  him 
binding  instructions  to  call  at  every  American  consular  office  in  his 
territory.  Our  consuls  frequently  complain  that  American  salesmen 
fail  to  visit  the  consulate.  The  consul  stands  ready  to  assist  every 
properly  accredited  American  salesman  by  advice  and  information, 
and  some  have  expressed  the  willingness  to  introduce  them  by  let- 
ter or-personally  to  managers  of  local  jobbing  or  commission  houses 
in  good  standing. 


184  NATIONAL     BUSINESS     CONGRESS 

(8)  Lastly,  if  you  desire  general  information  in  respect  to  a 
proposed  trade  jiolicy  or  conditions  applicable  to  particular  regions 
before  embarking  in  ex])ort  trade  or  enlarging  tbe  scope  of  your 
present  operations,  and  the  matter  would  seem  to  require  extended 
consideration,  T  suggest  that  you  go  to  Washington  and  visit  the 
Department  of  State  for  personal  conferences  either  in  the  Bureau 
of  Trade  Relations,  which  is  now  well  equipped  for  this  purpose,  or 
in  one  of  the  several  politico-geographic  divisions  which  a  wise  fore- 
sight has  provided  in  the  departmental  expansion  that  took  place 
about  two  years  ago. 


MERIT  SYSTEM  IN  THE  DIPLOMATIC  SERVICE. 

In  view  of  the  co-ordination  of  the  Diplomatic  and  Consular 
Services  for  the  promotion  of  our  foreign  trade  I  should  like  to 
make  brief  mention  of  the  extension  to  the  former  service  in  all 
grades  up  to  chief  of  mission  of  the  essential  principles  of  the  Execu- 
tive Order  covering  the  Consular  Service.  By  an  Executive  Order 
issued  by  President  Taft  on  November  26,  1909,  the  examination, 
appointment  and  promotion  of  secretaries  of  embassy  and  legation 
in  the  diplomatic  service  were  carefully  regulated  on  virtually  the 
same  merit  basis  as  applies  to  the  Consular  Service.  Since  the  date 
of  that  order  there  have  been  three  examinations  held  wherein  64 
men  were  examined ;  26  passed  successfully  and  24  received  appoint- 
ments as  secretaries  of  embassy  or  legation,  of  whom  17  were  from 
the  Northern  States  and  7  from  the  Southern  States.  Although  in- 
vitations were  extended  to  the  young  men  of  the  South  through 
members  of  Congress  and  the  heads  of  educational  institutions  com- 
paratively few  candidates  have  come  forward  from  that  part  of  the 
country. 

During  the  last  two  years  the  Department  of  State  has  so  admin- 
istered the  Diplomatic  Service  as  to  make  it  an  effective  agency  in 
the  promotion  of  the  foreign  trade  of  the  United  States.  From 
authoritative  statements  made  to  the  Department  it  appears  that 
American  citizens  engaged  in  commercial  and  financial  enterprises 
in  foreign  countries  have  received  advantages  valued  at  no  less  than 
$120,000,000  as  a  direct  result  of  the  practical  activities  of  this 
branch  of  our  foreign  service. 


NATIONAL     BUSINESS     CONGRESS  185 


CONSULAR  SERVICE  ALMOST  SELF-SUPPORTING. 

It  will  interest  you  as  business  men  to  know  that  notwithstand- 
ing the  substantial  upward  revision  of  consular  salaries  the  Con- 
sular Service  is  nearly  self-supporting.  Its  entire  cost  in  the  fiscal 
year  ended  June  30.  1911,  was  $1,954,000;  and  the  revenues  to 
the  treasury  in  consular  fees  amounted  to  $1,712,000.  leaving  a  net 
cost  to  our  Government  of  only  $242,000. 

LEGAL  BASIS  FOR  MERIT  SYSTEM  NEEDED. 

In  conclusion.  I  desire  to  say  a  few  words  respecting  the  cul- 
minating step  in  the  reorganization  of  the  Consular  and  Diplomatic 
Services.  It  is  most  desirable  that  the  important  constructive  work 
accomplished  by  the  President  and  the  Secretary  of  State  with  so 
much  care  and  impartial  fairness  to  the  people  of  all  political  parties 
and  sections  of  the  country  should  not  be  impaired  or  even  men- 
aced by  any  situation  that  might  arise  in  the  future.  The  present 
system  established  for  the  two  branches  of  our  foreign  service  by 
the  Executive  Orders  of  June  27,  1906,  and  November  26,  1909, 
should,  therefore,  be  placed  upon  a  permanent  legislative  footing, 
so  that,  as  at  present,  the  qualifications  of  candidates  for  appoint- 
ment shall  be  determined  by  impartial  examination,  regardless  of 
anv  political  affiliations ;  that  all  original  appointments  shall  be  made 
only  to  the  lower  grades,  and  that  promotion  in  the  service  shall  be 
based  only  upon  efficiency  and  ability  shown  in  the  service. 

THE  LOWDEN  BILL. 

The  business  sentiment  of  the  entire  country  has  crystallized 
clearly  and  emphatically  in  favor  of  the  perpetuation  of  the  present 
system,  and  this  can  be  accomplished  only  by  the  enactment  by  Con- 
gress of  a  law  for  this  purpose.  Several  bills  to  this  end  have  been 
introduced  in  Congress,  notably  the  CuUom-Sterling  Bill,  which  has 
received  the  support  of  chambers  of  commerce  generally,  and  the 
Lowden  Bill.  While  the  former  bill  would  certainly  perpetuate  the 
existing  system,  the  sentiment  in  Congress  is  that  it  is  unconstitu- 
tional and  hence  the  Department  of  State  believes  that  it  is  futile  to 
urge  its  passage.  On  the  other  hand,  the  bill  introduced  during  the 
last  sessfon  by  Representative  Lowden  of  Illinois  and  favorably  re- 
ported by  the  Committee  on  Foreign  Affairs  presents  no  such  objec- 


186  NATIONAL    BUSINESS     CONGRESS 


tion.  and  yet  it  would  accomplish  all  that  can  reasonably  be  expected. 
The  Honorable  Huntington  Wilson  has  well  said  of  this  bill  in  a 
recent  address : 

''It  perpetuates  the  diplomatic,  consular  and  departmental 
examination ;  makes  mandatory  the  keeping  of  impartial  effi- 
ciency records  in  all  three  branches  of  the  foreign  service ;  it 
makes  mandatory  the  report  of  the  Secretary  of  State  to  the 
President  of  all  these  data.  It  stops  there,  leaving  a  President 
free  to  make  appointments,  but  to  make  them  under  the  moral 
pressure  of  having  before  him  all  the  data  showing  who  has, 
through  impartial  examinations  and  through  the  keeping  of  the 
efficiency  records,  been  found  fit  for  appointment  or  promo- 
tion, and  having  that  all  before  him  as  the  result  of  and  with 
the  sanction  of  a  law  of  Congress.  Every  one  interested  in  the 
foreign  service  who  is  familiar  with  it  feels  that  that  bill  is  an 
ideal  bill ;  and  I  want  to  bespeak  for  the  American  business  men 
here  their  cordial  support  of  that,  instead  of  one  there  is  no 
chance  of  getting." 

According  to  the  Lowden  Bill  the  board  of  examiners  for  the 
consular  service  shall  be  composed  of  the  officer  charged  with  the 
administration  of  the  consular  service,  the  chief  of  the  Consular 
Bureau,  the  chief  of  the  Bureau  of  Trade  Relations,  and  the  chief 
examiner  of  the  Civil  Service  Commission,  or  such  other  officer  as 
that  Commission  shall  designate.  However  it  is  accomplished  I  am 
sure  that  the  business  public  of  this  country  will  welcome  the  enact- 
ment of  a  law  giving  permanent  effect  to  the  reforms  established  by 
executive  action  in  the  Consular  and  Diplomatic  Services  of  the 
United  States. 

NATIONAL  ADVISORY  BOARD  OF  COMMERCE. 

In  mingling  with  the  delegates  to  this  Congress  during  the  last 
two  days  I  have  heard  several  gentlemen  express  themselves  as  in 
favor  of  the  establishment  of  a  quasi-official  connecting  link  between 
the  United  States  Government  and  the  business  interests  of  the 
country,  somewhat  along  the  lines  of  the  National  Council  of  Com- 
merce, which  was  established  under  the  auspices  of  the  Depart- 
ment of  Commerce  and  Labor  a  few  years  ago.  Looking  at  the  mat- 
ter from  the  viewpoint  of  the  commercial  activities  of  the  Depart- 
ment of  State,  I  have  always  been  in  favor  of  the  basic  principles 
underlying  the  National  Council  of  Commerce,  and  it  seems  to  me 


NATIONAL    BUSINESS     CONGRESS  187 

that  if  the  Xational  Business  League  of  America,  with  the  prestige 
of  its  splendid  achievements  in  the  fourteen  years  of  its  career, 
would  galvanize  into  practical  usefulness  this  plan  of  an  authoritative 
medium  of  communication  between  the  trade  promoting  institutions 
of  the  United  States  government  and  the  commercial  organizations 
of  the  country,  it  would  thereby  perform  a  great  and  enduring  serv- 
ice to  the  American  business  public. 

Last  year  it  was  my  privilege  to  visit  the  principal  commercial 
countries  of  Europe  on  behalf  of  the  Department  of  State  for  the 
purpose  of  studying  organizations  and  methods  of  their  official  trade 
promoting  institutions.  In  Germany,  France,  Austria-Hungary, 
Italy,  Belgium  and  the  Netherlands,  I  found  that  the  Chambers  of 
Commerce  by  reason  of  their  quasi-official  status,  constituted  an 
important  feature  of  the  trade  promoting  institutions  of  the  Na- 
tional Government.  The  machinery  was  particularly  well  organ- 
ized in  the  German  Empire,  and  enabled  the  German  government  to 
obtain  promptly  and  authoritatively  a  correct  expression  of  the 
needs  and  wishes  of  the  different  industrial  committees,  and,  on  the 
other  hand,  to  disseminate  confidentially  through  the  chambers  of 
commerce  to  German  industrialists,  trade  information  received  from 
the  foreign  agents  of  the  government. 

In  the  L'nited  States  a  great  difficulty  is  encountered  in  any 
attempt  to  duplicate  the  German  system,  inasmuch  as  our  cham- 
bers of  commerce  are  loosely  and  variously  organized  with  abso- 
lutely no  cohesiveness,  except  such  as  is  offered  by  the  National 
Business  League  of  America  and  the  National  Board  of  Trade.  It 
seems  to  me  that  through  your  activities  a  most  useful  advisory  body 
might  be  created,  which  might  appropriately  be  called  THE  NA- 
TIONAL ADVISORY  BOARD  OF  COMMERCE.  While  such 
an  organization  would  be  of  obvious  assistance  to  the  Department 
of  Commerce  and  Labor  in  disseminating  confidential  information 
to  American  business  concerns,  it  would  be  equally  helpful  to  the 
Department  of  State  in  many  ways,  particularly  in  tariff  negotia- 
tions with  foreign  governments.  In  the  past  it  has  often  been-  diffi- 
cult for  the  department  to  know  what  tariff  concessions  it  is  most 
desirable  to  demand  in  particular  countries,  when  there  is  a  willing- 
ness shown  to  improve  the  conditions  of  access  to  their  markets. 
There  are  also  frequent  instances  when  the  Department  of  State 
desires  to  confer  with  representative  American  business  interests  in 
regard  to  actual  or  threatened  discriminations  in  foreign  countries 


188  NATIONAL     BUSINESS     CONGRESS 

against  the  commerce  of  the  United  States,  and  to  obtain  from  them 
reliable  information  on  which  to  base  diplomatic  representations  to 
the  offending  governments.  A  National  Advisory  Board  of  Com- 
merce would  act  as  a  clearing  house  for  the  views  and  requests  of 
the  business  organizations  of  the  entire  country,  which  it  is  deemed 
desirable  to  place  in  definite  form  before  the  Department  of  State 
for  its  consideration  and  possible  diplomatic  action. 
Gentlemen.  I  thank  you.     (Applause.) 

The  Chairman:  Gentlemen.  I  am  sure  we  are  all  greatly  in- 
debted to  Mr.  Osborne  for  this  very  valuable  address.  There  is 
much  food  for  thought,  and  I  am  sure  we  will  get  great  benefit 
from  it. 

Mr.  Charles  J.  \^opicka  :  Mr.  Chairman.  I  would  like  to  say 
a  few  words  in  regard  to  that  interesting  report  wdiich  I  have  just 
heard.  In  the  first  place.  I  want  to  congratulate  the  National  Busi- 
ness League  of  America  for  its  work  in  trying  to  reform  the  work 
of  the  consuls  of  the  United  States.  It  seems  to  me  that  the  League 
did  not  go  far  enough.  It  seems  to  me  when  you  want  to  regulate 
something  you  must  take  into  consideration  the  persons  who  are  to 
be  reformers  of  the  Consular  Service ;  that  you  should  have  a  prac- 
tical man  in  your  service,  and  you  must  pay  him  a  reasonable  salary. 

I  was  astonished  to  hear  the  report  that  most  of  the  consuls 
were  getting  $2,000  or  $2,500  or  $3,000  a  year  in  the  service  of  the 
United  States.  I  ask  you,  gentlemen,  as  practical  business  men,  can 
you  expect  a  good  sharp  business  man  as  your  representative  in  dif- 
ferent cities  in  this  world  for  that  ?  I  say  to  you  that  you  can  not. 
Whom  can  you  get  to  go  and  take  the  examination  for  consul  for 
$2,000  a  year?  You  might  get  a  young  man  who  is  ambitious,  and 
who  probably  has  some  education,  just  coming  fresh  from  the  col- 
lege or  from  the  university.  That  is  not  the  kind  of  a  representative 
the  business  people  of  America  want  to  have.  They  want  sharp 
business  men  from  whom  they  can  expect  good  advice ;  from  whom 
they  can  expect  that  his  advice  will  help  their  trade  or  their  export 
or  import,  whatever  the  case  may  be.  It  seems  to  me  that  if  you  go 
on  and  have  this  Consular  Service  put  on  a  proper  basis,  you  should 
see  to  it  that  our  men  are  better  paid. 

You  know  how  shameful  it  looks  when  you  go  to  the  Consular 
Service  in  Europe  and  they  tell  you  to  go  to  such  and  such  a  place 
which  is  far  from  the  select  residence  district  of  the  city;  in  other 


NATIONAL     BUSINESS     CONGRESS  189 

words,  a  man  like  that  must  look  out  that  he  may  live  on  $2,000  a 
year  and  pay  as  little  as  possible  for  rent,  and  so  on.  It  is  surely  a 
shame  that  they  do  not  pay  the  consular  officers  properly.  The 
United  States  pays  less  to  their  consuls  than  any  other  country  in 
the  world.  Now,  why  do  they  not  give  a  man  reasonable  pay  and 
expect  services  from  him?  Not  only  that,  if  a  man  is  in  service  for 
five  years  or  so — I  don't  know  that  these  bills  will  be  passed — then 
he  will  get  a  raise.  But  if  you  simply  keep  on  paying  them  this 
way  you  will  fail  in  the  end.  There  is  absolutely  no  question  about 
that. 

Dr.  S.^muel  AI.acClintock  :  Mr.  Chairman,  I  realize  it  is 
quite  late,  and,  therefore,  there  is  no  opportunity  at  this  time  to  dis- 
cuss any  of  these  questions,  but  if  any  of  you  gentlemen  were  here 
on  Monday  you  may  remember  that  I  brought  out  the  point  that  is 
being  made  by  this  gentleman.  Also  one  or  two  other  points  along 
the  same  line,  desiring  to  bring  your  attention  to  the  fact  that  it  is 
absolutely  necessary  to  take  some  action  in  order  to  increase  the 
efficiency  of  your  Consular  Service  by  bringing  into  it  a  better  class 
of  men.  As  this  gentleman  has  said,  you  cannot  get  the  right  kind 
of  men  to  go  into  the  service  and  stay  in  it  as  a  life  occupation  and 
feel  they  are  justified  in  cutting  themselves  off  from  their  home  sur- 
roundings and  influences  for  the  salaries  that  we  are  paying. 

It  seems  to  me,  therefore,  that  if  this  matter  were  given  a  little 
consideration  and  urged  upon  our  representatives  in  the  ways  that 
we  have  of  doing  so  it  would  be  ver}-  timely. 

I  was  in  Washington  two  or  three  weeks  ago  and  talked  with 
one  of  the  gentlemen  who  was  very  largely  concerned  in  the  admin- 
istration of  the  Consular  Service.  He  practically  said  that  our  great 
need  now  is  to  draw  into  the  service  the  kind  of  men  who  are  cap- 
able of  rendering  the  services  that  are  demanded  by  the  business 
community.  Now.  I  do  not  believe  that  our  present  scheme  offers 
sufficient  honors,  emoluments  or  inducements  of  any  kind  to  do  this. 
The  plan  that  is  in  operation  is  effective  and  efficient,  but  it  does 
not  succeed  in  drawing  the  best  men  into  the  service.  That  is  a 
thing,  therefore,  which  I  think  might  be  very  well  considered  by  the 
Resolutions  Committee  of  this  present  Congress.     (Applause.) 

The  Chairman  :  Gentlemen,  we  will  now  have  the  pleasure  of 
hearing  from  the  Hon.   E.   Clarence  Jones,  of   New  York.   Presi- 


190  NATIONAL     BUSINESS     CONGRESS 

dent  of  the  American  Embassy  Association,  on  the  subject: 
•'ELASTIC  CURRENCY  FOR  THE  PEOPLE,  STABLE, 
FLEXIBLE,  RECONVERTIBLE."     (Applause.) 

j\Ik.  K.  Clarence  Jones:  Mr.  Chairman  and  Gentlemen — It 
is  always  a  pleasure  to  address  what  might  be  called  by  us  of  the 
Atlantic  seacoast  a  Western  body.  I  find  I  always  get  inspiration 
from  the  West.  I  find  the  West  is  more  progressive  than  most  of 
us  on  the  Eastern  coast  are. 

It  was  two  years  ago  that  we  opened  a  campaign  in  favor  of 
the  government  purchasing  homes  for  its  ambassadors  abroad.  On 
that  occasion  the  National  Business  League  of  America,  as  well  as 
the  Chicago  Association  of  Commerce,  gave  us  their  unstinted  sup- 
port, and  I  think  it  is  largely  due  to  the  introduction  and  opportunity 
they  gave  us  that  we  carried  the  work  to  a  successful  issue  and  suc- 
ceeded last  February  in  having  Congress  enact  a  law  appropriating 
annually,  until  the  work  is  done,  $500,000  a  year  for  the  purchase 
of  homes  for  our  ambassadors  abroad.  I  am  not  going  to  revert  to 
that  old  subject,  but  I  only  touched  upon  it  because  I  thought  Mr. 
Gates  wished  me  to.  And  I  only  wanted  to  thank  the  Business 
League  for  what  they  did  then,  and  say  that  I  hope  the  omen  of 
appearing  under  their  auspices  will  give  the  views  that  I  am  about 
to  give  utterance  to  as  much  currency  and  have  as  much  beneficial 
result  as  the  old  campaign  had. 

I  sometimes  think  that  we  in  the  East  are  as  far  behind  the 
West  as  England  is  behind  us.  I  am  reminded  of  a  little  story  told 
in  England  not  long  ago  that  shows  how  much  England  is  behind 
even  the  Atlantic  coast.  When  a  woman  wdio  owned  her  little  store 
said  to  an  American  boy  who  was  visiting  her :  "J'lmmie,  every- 
thing depends  upon  yourself  to  make  your  way  in  life.  When  I 
was  a  young  woman  I  went  to  work  here  in  London  for  $3  a  week, 
and  at  the  end  of  a  few  years  I  owned  the  whole  store."  Jimmie 
said :  "You  cannot  do  that  in  New  York.  They  have  cash  regis- 
ters there."     (Applause.) 

In  the  panic  of  1893  I  was  actively  engaged,  and  was  then  as 
I  am  now,  a  member  of  the  New  York  Stock  Exchange.  I  was 
called  on  the  telephone  by  one  of  the  largest  savings  banks  be- 
tween New  York  and  Boston,  and  the  President  said  to  me:  "Mr. 
Jones,  we  are  having  a  run  on  our  bank.     W'e  will  send  you  to- 


NATIONAL     BUSINESS     CONGRESS  191 

niglit  500,000  Governments,  and  we  want  you  to  send  us  the 
money.    We  don't  want  any  checks ;  checks  are  no  good." 

Currency  at  that  time  was  selhng  at  a  premium  of  about  5  per 
cent.  I  said :  "Hold  your  bonds  for  further  instructions,  till  I  see 
what  I  can  do."  I  sent  out  representatives  among  the  National 
Banks  of  the  city,  who  I  felt  should  be  buyers  of  these  bonds  at 
a  price,  and  offered  them  to  them.  In  the  entire  City  of  New  York 
I  was  only  successful  in  getting  an  order,  and  that  about  20  points 
under  the  last  quoted  price,  for  50,000  of  those  500,000.  j\Iean- 
while  I  had  had  my  correspondents  go  over  the  Boston  market  and 
they  found  they  could  sell  them  in  Boston  at  a  very  low  price  and 
buy  the  currency  there  for  about  5  per  cent  premium.  I  called  up 
the  banker  and  told  him  not  to  ship  the  bonds  to  New  York,  but 
to  ship  them  to  Boston;  that  they  would  ship  him  the  currency  the 
next  day.  The  thought  w^as  then  germinated  in  my  mind  when 
we  had  a  currency  founded  on  Government  bonds ;  when  there  was 
seven  hundred  and  odd  millions  of  it  out,  when  a  bank  had  a  run 
on  it  and  it  had  the  Government  bonds  on  which  that  currency  was 
issued,  and  it  couldn't  get  the  National  Banks  who  had  the  right  to 
get  the  currency  to  get  it  and  give  it  to  them,  and  they  could  not 
get  it  themselves,  I  thought  there  was  something  wrong.  It  is 
only  recently  since  there  has  been  so  much  agitation,  and  neces- 
sary agitation,  to  prove  the  currency  question,  that  I  again  gave 
thought  to  this  idea,  and  from  that  experience,  what  I  am  going  to 
say  to  you  has  sprung. 

All  economists  and  financiers  agree  in  the  opinion  that  the  cur- 
rency of  the  United  States  lacks  elasticity.  It  does  not  expand  and 
contract  with  the  rising  and  falling  tides  of  trade.  The  necessity 
of  some  change  in  the  banking  system  which  will  provide  a  more 
elastic  currency  has  been  urged  upon  Congress  officially  and  unof- 
ficially for  twenty-five  years. 

Most  of  those  who  urge  a  change  evidently  believe  that  no  addi- 
tional elasticity  can  be  given  to  a  currency  based  solely  upon  the 
security  of  government  bonds.  They  think  that  it  would  be  desir- 
able if  possible  to  abandon  the  system  by  which  National  Bank 
Notes  are  issued  upon  the  pledge  of  government  bonds  as  security. 
When  they  endeavor  to  agree  upon  a  substitute  for  the  present 
National  Bank  notes  secured  by  bonds  of  the  United  States  there  is 
considerable  difference  of  opinion  as  to  what  should  be  done.  In 
general  their  recommendations  provide  in  one  form  or  another  for 


192  NATIONAL     BUSINESS     CONGRESS 

an  issue  of  bank  notes  secured  under  suitable  regulations  and  re- 
strictions by  the  assets  of  the  banks  issuing  the  notes.  This  form  of 
note  issue  is  conveniently  designated  as  "asset  currency"  and  it  will 
be  equally  convenient  for  the  purposes  of  this  article  to  refer  to  a 
currency  secured  by  government  bonds  as  "bond  currency." 

The  only  progress  wdiich  has  been  made  in  National  legislation 
in  the  direction  of  the  adoption  of  "asset  currency"  was  contained 
in  the  Act  of  May  30,  1908.  This  was  passed  under  the  stress  of 
fear  induced  by  the  recent  memory  of  the  panic  of  1907  when  there 
was  a  practical  suspension  of  currency  payments  by  banks  through- 
out the  country,  and  when  currency  was  bought  and  sold  as  a  com- 
modity in  the  principal  money  centers.  This  law  authorized  the 
issue  of  notes  not  secured  by  United  States  bonds  in  two  ways. 

Any  National  Bank  which  fulfills  certain  requirements  may 
secure  authority  to  issue  notes  secured  by  bonds  of  any  State  of  the 
United  States  or  of  any  City,  Town,  County  or  other  municipaHty 
or  district  in  the  United  States  which  has  been  in  existence  for  ten 
years  previous  to  such  deposit  and  has  not  defaulted  during  that 
period  in  the  payment  of  any  part  of  the  principal  or  interest  of  any 
funded  debt  and  whose  net  funded  debt  does  not  exceed  10%  of 
the  assessed  valuation  of  its  taxable  property. 

The  law  further  provides  for  the  formation  of  national  cur- 
rency associations  by  not  less  than  ten  National  Banks,  each  having 
an  unimpaired  capital  and  a  surplus  of  not  less  than  207c  and  with 
an  aggregate  capital  and  surplus  of  at  least  $5,000,000.  Any  such 
currency  association  acting  on  behalf  of  any  one  of  its  members  may 
upon  its  fulfillment  of  certain  requirements  obtain  authority  from 
the  Secretary  of  the  Treasury  for  an  issue  of  additional  notes  to  the 
currency  association  on  behalf  of  its  members  secured  by  the  de- 
posit of  any  securities,  including  commercial  paper. 

The  essential  feature  of  one  method  is  that  notes  may  be 
"secured  by  the  deposit  of  bonds  other  than  bonds  of  the  United 
States."  The  fact  that  the  "other  bonds"  must  be  State  or  munici- 
pal bonds  makes  this  new  currency  a  "bond  currency."  The  only 
difference  is  that  the  selection  of  bonds  is  not  limited  to  United 
States  bonds,  but  is  extended  to  State  and  municipal  bonds.  The 
proposed  currency  is.  therefore,  a  State  and  municipal  "bond  cur- 
rency" and  not  a  United  States  "bond  currency." 

The  essential  feature  of  the  other  method  is  that  notes  can  be 
issued  upon  the  security  of  commercial  assets.     The  security  for  the 


NATIONAL     BUSINESS     CONGRESS  193 

notes  may  be  "any  securities,  including  commercial  paper"  but  notes 
cannot  be  issued  on  the  security  of  commercial  paper  to  a  greater 
extent  than  30%  of  the  unimpaired  capital  and  surplus  of  the  issu- 
ing bank  nor  to  exceed  75%  of  the  cash  value  of  the  securities  or 
commercial  paper  deposited  except  in  the  case  of  State  and  munici- 
pal bonds,  upon  wliich  notes  may  be  issued  to  the  extent  of  90%  of 
their  market  value. 

Judged  by  the  experience  of  the  past  the  most  objectionable 
feature  is  the  authority  to  issue  notes  to  circulate  as  money,  based 
on  the  pledge  of  State  and  municipal  bonds.  The  experience  of 
the  country  under  the  State  Banking  system  from  1837  to  1863 
demonstrated  the  insecurity  of  bank  notes  issued  upon  the  pledge  of 
such  securities.  The  permission  to  use  State  and  municipal  bonds 
as  security  for  circulatio)i  multiplies  the  nnniber  and  character  of 
the  goi'ernments  upon  whose  credit  the  money  of  the  people  is  de- 
pendent for  its  value.  Under  our  system  of  government  there  is 
no  practical  method  to  prevent  the  repudiation  of  bonds  by  State 
and  municipal  governments.  A  currency  based  on  State  and  muni- 
cipal bonds  can  be  no  more  elastic  than  one  based  on  United  States 
bonds.  The  addition  of  State  and  municipal  bonds  merely  adds  an 
inferior  bond  currency  and  gives  no  more  elasticity  to  the  currency. 

The  notes  authorized  by  this  law  have  been  designated  as 
"emergency  currency"  because  it  was  not  intended  that  they  should 
be  issued  except  in  times  of  panic  or  when  money  is  in  great  de- 
mand. As  a  means  of  preventing  their  issue,  except  at  times  when 
rates  of  interest  are  very  high,  and  compelling  their  retirement  when 
the  emergency  is  past,  the  law  provides  for  a  tax  upon  the  notes 
for  the  first  month  of  their  issue  at  the  rate  of  5%  per  annum  and 
afterwards  an  additional  tax  of  1%  per  annum  for  each  month  until 
a  tax  of  10%  per  annum  is  reached,  and  thereafter  an  annual  tax 
of  10%. 

Currency  associations  have  been  formed  in  various  parts  of  the 
country  pursuant  to  the  provisions  of  this  law,  but  up  to  the  present 
time  no  notes  not  secured  by  United  States  bonds  have  been  issued, 
either  by  the  currency  associations  or  by  the  National  Banks.  The 
existence  of  these  provisions  for  "emergency  currency"  does  not 
satisfy  the  demand  for  a  modification  of  the  permanent  currency 
system  for  use  in  ordinary  times.  The  temporary  character  of  the 
legislation  is  shown  by  the  fact  that  the  operation  of  the  law  expires 
by  limitation  on  the  30th  day  of  June,  1914. 


194  NATIONAL     BUSINESS     CONGRESS 

The  difference  of  opinion  in  regard  to  the  modifications  that 
should  be  made  in  our  present  currency  system  in  order  to  make  it 
more  elastic  and  responsive  to  the  needs  of  business  may  be  put  in 
two  classes:  differences  of  opinion  as  to  the  intrinsic  merits  of  the 
dift"erent  plans  proposed,  and  differences  of  opinion  as  to  the  politi- 
cal difficulties  which  will  lie  in  the  way  of  their  adoption.  All  stu- 
dents of  the  problem  probably  agree  that  it  will  be  difficult  to  secure 
at  any  early  date,  the  passage  of  a  law  which  will  abolish  entirely 
the  present  United  States  "bond  currency"  and  substitute  in  its  place 
any  system  of  "asset  currency."  The  National  Bank  notes  secured 
by  United  States  bonds,  have  stood  the  test  of  zvar  and  panic  and 
hold  a  firm  place  in  the  confidence  of  the  American  people  and  the 
world. 

The  existence  of  this  political  obstacle  to  a  fundamental  change 
in  the  character  of  the  security  back  of  our  National  Bank  currency 
raises  the  question  whether  something  cannot  be  done  to  make  a 
United  States  "bond  currency"  more  elastic  and  at  the  same  time 
leave  the  field  open  for  the  adoption  of  a  plan  for  the  issue  of  "asset 
currency"  whenever  an  agreement  can  be  reached  as  to  a  safe  and 
scientific  system.  Every  suggestion  for  the  accomplishment  of  this 
result  is  to  be  welcomed  in  the  interests  of  the  public  welfare.  In 
this  spirit  the  author  of  this  article  proposes  a  plan  for  the  issue  of 
currency  secured  by  United  States  bonds  which,  in  his  opinion,  will 
render  that  portion  of  the  circulating  medium  of  the  United  States 
more  elastic  than  at  present  without,  in  any  way,  interfering  with 
the  advocacy  and  adoption  in  future  of  any  proper  plan  for  the  issue 
of  "asset  currency." 

The  substance  of  this  plan  is  that  the  right  to  receive  notes 
to  circulate  as  money  secured  by  the  deposit  and  pledge  of  United 
States  bonds  shall  not  be  limited  to  National  Banks,  but  shall  be 
conferred  upon  any  person  who  owns  United  States  bonds. 

Why  should  John  Brown,  because  he  incorporates  himself  as 
the  John  Brozvn  National  Bank  with  a  capital  of  $100,000  be  allowed 
to  get  $100,000  in  currency  from  the  government  on  the  deposit  of 
government  bonds  to  that  amount,  when  John  Brown,  as  an  indi- 
vidual, or  as  the  John  Brown  Dry  Goods  Co.,  or  the  John  Brown 
Plozv  Factory,  or  the  John  Brozvn  Trust  Co.,  or  the  John  Brown 
State  or  Savings  Bank,  cannot  do  so  upon  the  pledge  of  the  same 
bonds? 


NATIONAL     BUSINESS     CONGRESS  195 

The  only  answer  to  this  question  is  that  practically  the  exclu- 
sive right  to  issue  notes  to  circulate  as  money  is  conferred  by  law 
upon  National  Banks  for  reasons  which  arose  out  of  the  Civil  War. 
These  reasons  were  the  desire  for  a  uniform  currency,  controllable 
in  amount  by  the  National  Government  and  receivable  for  taxes  by 
the  National  Treasury ;  the  creation  of  a  permanent  market  for  a 
large  amount  of  United  States  bonds  and  the  consequent  improve- 
ment of  the  Natiotial  credit ;  the  creation  of  a  large  number  of  finan- 
cial institutions  under  national  control  widely  distributed  over  the 
country  which  could  serve  as  depositaries  for  government  funds 
and  act  as  fiscal  agents  of  the  Treasury  and  distribute  bonds  to  sub- 
scribers ;  and  the  increased  guaranty  that  in  future  there  would  be 
fewer  banks  capable  of  furnishing  credit  to  rebellious  states. 

The  necessity  for  the  creation  of  a  market  for  bonds  through 
the  medium  of  National  Banks  no  longer  exists.  The  preservation 
of  the  system  of  National  Banks  as  Government  depositaries  and 
fiscal  agents  of  the  Treasury,  is  not  dependent  on  their  exclusive 
privilege  to  issue  notes  secured  by  United  States  bonds,  and  the  uni- 
formity of  the  currency  will  be  equally  safeguarded  under  the  pro- 
posed plan  of  the  issue  of  notes  to  any  person  or  corporation  upon 
the  pledge  of  United  States  bonds.  The  security  behind  the  cur- 
rency, in  either  case,  is  exactly  the  same,  and  if  the  National  Bank 
currency  is  now  good,  the  same  currency  will  be  equally  good  when 
issued  in  exchange  for  United  States  bonds  deposited  by  an  indi- 
vidual or  a  trading  or  manufacturing  company. 

Theoretically  State  banks  have  the  right  to  issue  notes  to  cir- 
culate as  money  in  accordance  with  the  varying  requirements  of  the 
laws  of  the  different  states.  Prior  to  the  establishment  of  the  Na- 
tional Bank  system,  they  exercised  this  right.  The  system  was  bad 
because  of  its  lack  of  uniformity  and  the  resulting  inequality  in  the 
value  of  the  notes.  Congress  rendered  the  exercise  of  the  right  to 
issue  notes  by  State  Banks  practically  impossible  by  imposing  upon 
such  notes  a  tax  of  10%  per  annum.  Under  the  proposed  plan 
State  banks  as  well  as  National  would  be  put  on  the  same  status  cis 
any  individual  or  trading  or  manufacturing  company — aJl  zvould 
have  the  same  right  to  secure  currency  upon  the  pledge  of  United 
States  bonds. 

This  system  of  currency  coidd  be  worked  out  in  practical  form 
by  having  Congress  enact  a  lazv  making  all  United  States  bonds  con- 


196  N  A  T  I  O  N  A  L    BUSINESS     CONGRESS 

vertible  into  currency  and  reconvertible  into  bonds  under  the  follow- 
ing plan : 

1.  Any  person,  firm  or  corporation  may  deposit  bonds  in  any 
amount  zvith  any  sub-treasury  of  the  United  States,  and  receive  in 
lieu  thereof  circulating  notes  to  the  amount  of  the  face  value  of  the 
bonds  so  deposited. 

2.  Any  person,  firm  or  corporation  may  at  any  time  return  to 
any  sub-treasury  any  such  circulating  notes  in  amounts  of  $ioo  or 
any  multiple  thereof  and  receive  in  exchange  therefor  bonds  to  the 
amount  of  the  face  value  of  the  notes  so  returned. 

5.  Interest  on  the  bonds  shall  cease  while  the  circulating  notes 
are  outstanding,  but  shall  commence  again  zvhen  the  notes  are  re- 
turned and  the  bonds  are  again  issued. 

4.  All  future  issues  of  United  States  bonds  shall  be  in  denomi- 
nations of  $100  and  multiples  thereof  and  allotted  at  par  to  the 
smallest  subscribers  first. 

These  are  the  essential  features  of  the  plan.  The  details  can  be 
worked  out  as  a  matter  of  legislation  and  administration. 

All  future  sales  of  bonds  at  par  to  the  smallest  subscribers  first 
will  overcome  the  existing  discouragement  to  small  bidders,  who  are 
puzzled  by  the  fractional  premium  that  may  be  necessary  to  secure 
them  and  consequently  do  not  bid  at  all. 

This  method  of  issue  and  allotment  will  establish  a  direct  mar- 
ket for  the  bonds  with  the  people  and  remove  the  government  from 
the  hands  of  syndicates.  Undoubtedly  large  financial  institutions 
can  apply  for  small  allotments  in  the  names  of  employes,  but  in 
view  of  the  size  of  the  bond  issues,  this  process  of  acquiring  large 
blocks  of  bonds  will  not  seriously  deprive  the  general  public  of  the 
chance  to  get  them. 

No  government  can  issue  and  sell  bonds  unless  somebody  makes 
a  profit  from  the  purchase.  It  is  in  every  way  desirable  that  this 
profit  should  be  made  by  the  general  public,  instead  of  being  divided 
between  the  government  and  syndicates  as  at  present. 

The  Nation  zvould  derive  more  permanent  benefit  by  having  the 
general  public  make  the  profit  and  placing  its  bonds  directly  in  their 
hands  than  by  getting  a  trifling  profit  by  selling  the  bonds  at  a  pre- 
mium under  the  present  system  which  makes  the  National  Banks 
practically  the  only  market  for  United  States  bonds. 

The  total  interest-bearing  bonded  debt  of  the  United  States 
outstanding  on  October  31,  1911,  was  $963,349,390.     Bonds  to  the 


NATIONAL     BUSINESS     CONGRESS  197 


amount  of  $714,170,320  (74%)  were  on  deposit  with  the  Treasurer 
of  the  United  States  to  secure  circulation,  and  $38,791,700  (4%) 
were  on  deposit  with  the  Treasurer  of  the  United  States  to  secure 
deposits  of  public  moneys  in  National  Banks.  In  all  $752,962,020. 
Thus  78%  of  the  entire  interest-bearing  bonds  of  the  United  States 
were  held  by  National  Banks  on  October  31,  1911,  either  to  secure 
the  issue  of  bank  notes  or  to  secure  deposits  of  pubUc  money. 

In  addition  to  these  amounts  ofificial  reports  to  the  Comptroller 
of  the  Currency  show  that  the  National  Banks  usually  hold  about 
$10,000,000  (1%)  United  States  bonds  as  investments,  and  that 
about  $18,000,000  (27c)  are  held  as  investments  by  State  Banks, 
savings  banks,  private  banks  and  loan  and  trust  companies.  This 
leaves  about  $182,500,000  bonds— less  than  19  per  cent  of  the  entire 
interest-bearing  bonded  debt  of  the  United  States,  available  for  in- 
vestment to  persons  other  than  banks  and  financial  institutions. 
There  is  no  means  of  knowing  accurately  to  w^hat  extent  this  small 
remnant  of  bonds  is  held  by  insurance  companies  and  other  institu- 
tions which  do  not  report  to  the  Comptroller  of  the  Currency.  It  is 
clear  that  the  amount  of  United  States  bonds  held  by  individual  in- 
vestors in  the  United  States,  is  ridiculously  small.  The  system 
which  brings  about  this  result  is  short-sighted  on  the  part  of  any 
government,  and  particularly  on  the  part  of  the  government  of  a 
democracy. 

The  strongest  opponents  of  any  government  are  transformed 
into  supporters  by  the  ownership  of  its  bonds. 

This  method  is  pursued  by  other  governments  and  tends  to 
strengthen  any  government  wnth  its  people. 

The  bonds  should  bear  3%  interest.  At  the  present  time  no 
government  in  the  world,  unless  it  creates  a  fictitious  market  for  its 
bonds  as  ours  has  done,  can  borrow  for  less  than  3%  and  have  its 
bonds  sell  above  par.  Any  rate  below  this  is  forced  by  law  and  paid 
for  by  other  exclusive  advantages  and  cannot  be  depended  upon  in 
time  of  trouble  or  emergency.  Forced  by  a  fictitious  market,  ours 
is  the  only  government  w^hose  bonds  sell  on  a  lower  interest  basis 
than  three  per  cent. 

All  bonds  should  be  convertible  into  currency  at  the  option  of 
the  holders,  zcho  should  have  the  right  at  any  time  to  send  or  deliver 
his  bonds  to  the  nearest  sub-treasury  and  receive  in  exchange  there- 
for, currency  equal  in  amount  to  the  par  -value  of  his  bonds.  Inter- 
est on  the  bonds  should  be  suspended  tvhile  the  bonds  are  on  deposit. 


198 


NATIONAL    BUSINESS     CONGRESS 


When  the  depositor  no  longer  zuishes  to  use  the  currency,  he  should 
have  the  right  to  return  the  same  amount  of  currency  and  receive 
back  his  bonds.  Interest  on  the  bonds  should  be  adjusted  and  then 
again  begin  to  run. 

The  bonds  in  size  may  be  comparatively  small.  Not  much 
larger  than  Bank  Notes. 

This  process  of  conversion  of  bonds  into  currency  and  recon- 
version of  currency  into  bonds,  should  be  performed  as  often  during 
the  life  of  the  bonds  as  any  holder  desires.  Provision  could  be 
made  for  the  registration  of  bonds  in  the  names  of  holders  who 
desire  it. 

All  sub-treasuries  should  keep  on  hand  a  supply  of  currency 
exchangeable  for  bonds  and  bonds  exchangeable  for  currency,  just 
as  the  postoffices  now  keep  on  hand  money  orders  exchangeable  for 
cash  and  cash  exchangeable  for  money  orders.  Under  a  simple  sys- 
tem of  books  the  exchanges  can  be  made  with  practically  little,  if 
any,  more  expense  than  the  postoffice  department  now  incurs  in 
issuing  money  orders  and  taking  savings  deposits. 

The  profit  that  the  government  would  make  by  suspending  the 
payment  of  interest  on  the  bonds,  while  the  currency  is  outstanding, 
would  more  than  pay  for  the  printing  of  the  currency,  apart  from 
the  profits  on  bonds  and  currency  that  would  be  lost  and  destroyed 
in  the  course  of  active  circulation.  The  gain  to  the  government 
on  account  of  National  Bank  notes  lost  or  destroyed  and  conse- 
quently never  presented  for  redemption,  has  been  estimated  to  be 
two-fifths  of  one  per  cent  upon  the  total  currency  issued.  Under 
the  present  system,  the  National  Banks  receive  the  interest  on  the 
bonds  at  the  same  time  that  they  either  keep  or  loan  the  principal 
in  the  form  of  currency.  The  plan  proposed  does  not  contemplate 
the  withdrazval  of  the  present  privilege  from  National  Banks  so  far 
as  e.risting  issues  of  bonds  are  concerned.  Any  increased  cost  to 
the  government  in  the  administration  of  the  plan  in  reference  to  new 
issues  of  bonds  would  be  more  than  met  by  the  saving  of  interest. 

This  plan  will  largely  remove  the  pressure  on  the  banks  by  the 
people,  and  every  business  man  can  carry  a  certain  percentage  of  his 
assets  in  these  bonds,  knowing  that  when  he  needs  money  he  can  get 
it  by  simply  sacrificing  his  5%  interest.  It  will  not  be  necessary  for 
him  either  to  sell  securities  at  a  loss  in  a  low  market  or  borrow 
money  at  a  high  rate  of  interest  in  time  of  stringency,  which  is  the 
time  when  securities  must  be  sold  at  the  greatest  loss  and  money  bor- 


NATIONAL     BUSINESS     CONGRESS  199 

rowed  at  the  greatest  cost.  All  incentive  to  the  hoarding  of  cur- 
rency tending  to  create  panic  and  high  interest  rates  will  vanish.  The 
plan  zvill  operate  against  the  control  of  money  by  concentrated  bank- 
ing capital  and  zvill  tend  toivard  establishing  a  fixed  lozv  rate  of  in- 
terest, zvhich  is  so  desirable  to  aid  in  bringing  the  financial  center  of 
the  zi'orld  to  this  country. 

When  the  farmers  of  the  West  and  South  shall  have  invested 
their  surplus  in  government  bonds  and  need  money,  with  which  to 
harv^est  their  crops  and  send  them  to  market,  they  will  largely  be 
independent  of  the  local  banks.  Every  such  farmer  can  send  his 
bonds  to  the  nearest  sub-treasury  for  deposit  and  promptly  secure 
currency  in  exchange.  The  only  cost  to  him  for  the  currency  is 
the  surrender  of  the  3%  interest  per  annum  on  his  bonds  during  the 
time  that  he  keeps  the  currency. 

The  State  Banks  in  the  West  and  South,  when  crops  are  to  be 
harvested  and  moved  to  market,  can  pursue  the  same  plan  and 
secure  a  large  volume  of  currency  each  recurring  season  for  the 
accommodation  of  their  customers. 

When  manufacturers  and  merchants  wish  to  lay  in  a  new  stock 
of  raw  material  and  merchandise  or  to  carry  manufactured  goods 
until  sold,  they  can  secure  the  currency  they  need  by  the  sacrifice  of 
the  interest  on  their  surplus  if  this  is  invested  in  United  States 
bonds. 

Each  farmer,  banker,  manufacturer  or  merchant,  when  he  has 
harvested  his  crops,  collected  his  loans  or  sold  his  merchandise,  can 
return  his  currency  or  its  equivalent  in  money  to  the  sub-treasury 
where  the  bonds  are  deposited,  and  receive  back  his  bonds  and  again 
have  his  surplus  earning  interest  at  the  rate  of  3%  in  the  safest 
investment  of  the  country,  and  at  no  expense  for  brokerage  or  other 
charges  and  at  no  loss  of  any  part  of  his  investment. 

Every  farmer  and  business  man  can  thus  be  encouraged  to  carry 
as  large  a  part  as  possible  of  his  surplus  assets  in  government  bonds, 
knozinng  that  whenever  he  needs  money  he  can  get  it  by  the  sur- 
render of  the  interest  on  his  investment,  and  will  not  have  to  sell 
something  in  an  emergency  on  a  falling  market,  or  borrozv  from  his 
bank  at  high  rates  of  interest. 

By  this  plan  hundreds  of  thousands  of  people  would  ozvn 
United  States  bonds  zvho  do  not  do  so  nozv,  and  would  by  reason  of 
that  fact  be  more  interested  in  the  good  conduct  of  the  government 
than  thcx  are  nozi'.     The  government  zvould  always  have  a  market 


200  NATIONAL     BUSINESS     CONGRESS 


for  its  bonds  among  its  07cn  citi::c)is,  as  France  has  ichcnez'cr  it  has 
any  to  offer. 

In  the  opinion  of  the  author  this  plan  would  fit  into  the  present 
currency  system  of  the  United  States  without  any  disturbance  and 
would  make  the  currency  more  elastic  and  would  be  advantageous 
both  to  the  government  and  to  the  people.  The  two  forms  of  pres- 
ent paper  money  which  would  be  affected  by  the  adoption  of  this 
plan  are  the  National  Bank  notes  and  the  greenbacks. 

NATIONAL  BANK  NOTES. 

At  the  close  of  business  on  October  31,  1911,  there  were  in 
operation  7,331  National  Banks  with  an  authorized  capital  of  $1,- 
032,632,135.  On  the  same  date,  United  States  bonds  to  the  amount 
of  $714,170,320  were  on  deposit  with  the  Treasurer  of  the  United 
States  as  security  for  the  issue  of  National  Bank  notes.  Thus 
seventy-four  per  cent  (74%)  of  the  entire  interest  bearing  bonded 
debt  of  the  United  States  on  October  31,  1911,  was  held  by  the  Na- 
tional Banks  as  security  for  the  issue  of  notes  to  circulate  as  money. 

The  profit  obtained  by  the  banks  on  this  circulation  would  be  a 
matter  of  simple  calculation  if  the  bonds  were  always  obtainable  at 
par  and  the  charges  of  the  government  for  taxes,  expenses  and  the 
sinking  fund  were  uniform  for  all  bonds  and  notes.  The  notes  is- 
sued by  the  banks  would  have  the  same  loanable  value  as  the  origi- 
nal capital  used  to  purchase  the  bonds  and  the  interest  obtainable  on 
the  notes,  when  loaned  or  invested  by  the  bank,  would  be  exactly  the 
same  as  the  bank  would  have  obtained  on  the  loan  or  investment  of 
its  original  capital.  In  that  case  the  profit  to  the  banks  on  the  trans- 
action would  be  represented  by  the  difference  between  the  interest 
on  the  bonds  and  the  charges  of  the  government  for  taxes,  expenses 
and  sinking  fund.  But  the  calculation  of  profit  is  not  thus  simple. 
The  price  of  the  bonds  varies  from  month  to  month  and  day  to  day 
and  the  charges  of  the  government  are  not  uniform.  The  Comp- 
troller of  the  Currency  makes  calculations  from  month  to  month  to 
show  the  actual  profit  on  the  circulation  based  on  the  average  net 
price  of  the  bonds  of  different  classes  for  the  current  month.  No 
such  calculation  is  made  for  the  three  per  cent  bonds  of  the  loan  of 
1908,  for  the  reason  that  the  government  is  able  to  call  them  at  any 
time  from  now  to  August  1,   1918.     No  computations  based  upon 


NATIONAL     BUSINESS     CONGRESS 


201 


the  value  of  these  bonds  can  correctly  be  made,  because  of  this  un- 
certain date  of  maturity.  They  are  at  a  premium.  Their  average  net 
price  is  approximately  101 3^.  If  any  of  these  bonds  pledged  for 
circulation  were  called  for  payment  at  par,  the  bank  would  lose  the 
premium. 

The  method  of  computation  for  the  2%  consols  of  1930,  the 
4%  loan  of  1925  and  the  2%  Panama  Canal  bonds  is  shown  in  the 
marginal  table  and  explained  by  the  Comptroller  of  the  Currency  in 
the  following  language: 

"Money  is  assumed  to  be  worth  6%  and  the  measure  of  profit 
is  the  difference  between  the  net  receipts  from  the  circulation  loaned 
at  6%  and  interest  that  would  be  obtained  on  the  cost  of  the  bonds 
loaned  at  the  same  rate ;  in  other  words,  from  the  interest  received 
on  the  bonds  at  the  rate  provided  therein,  and  the  interest  on  circu- 
lation loaned  at  6%  are  deducted  the  taxes  on  circulation,  expense 
incident  to  the  obtaining  of  circulation;  i.e.,  plates,  redemption 
charges,  etc.,  together  with  the  sinking  fund,  and  from  the  difference 
is  deducted  the  interest  on  the  cost  of  the  bonds  to  show  the  profit." 

Profit  on  National  Bank  circulation  based  on  a  deposit  of  $100,- 
000.  United  States  Consols  of  1930;  Loan  of  1925  and  Panama 
Canal  Loan  at  the  average  net  price  for  the  last  month  covered  by 
the  last  annual  report  of  the  Comptroller  of  the  Currency : 


Interest 
Circulation    Interest    on  cir- 
Cost  of        obtain-  on        culation       Gross 

bonds  able  bonds       @  6%       Receipts 


Tax 


Ex- 
penses 


Consols  of  1930.  .  .  .$101,005    -5100,000    82,000     $6,000     $  8,000     $    500     $62.50 

Loan  of  1925 115,380      100,000      4,000       6,000       10,000       1,000       62.50 

Panama  Canal  Loan  100,920      100,000      2,000       6,000         8,000  500       62.50 


Sinking: 
Fund 

Consols  of  1930.  .  .  .$  27.58 

Loan  of  1925 688.45 

Panama  Canal  Loan     15.17 


Total 
De- 
ductions 

S    590.08 

1,750.95 

577.67 


Net 
Receipts 

87,409.92 
8,249.05 
7,422.33 


Interest  Profit  on  circula- 

on  cost  of  tion  in  excesg  of 

bonds  at  6%  on  investment 

6%  Amount    Per  cent 

$6,060.30  $1,349.62       1.336 

6,922.80  1,326.25       1.149 

6,055.20  1,367.13        1.355 


The  bonds  on  deposit  with  the  Treasurer  of  the  United  States 
as  security  for  National  Bank  notes  on  October  31,  1911,  were  dis- 
tributed among  the  different  classes  as  follows:  2%  Consols  of  1930 
—$593^)06,600;  3%  Loan  of  1908— $18,199,380;  (omitted  below) 
4%  Loan  of  1925— $22,854,300 ;  2%   Panama  Canal  Loans— $80,- 


202  NATIONAL     BUSINESS     CONGRESS 

110,040.  The  following  table  will  show  the  profits  obtainable  by 
the  National  Banks  on  circulation  in  one  year,  based  upon  the 
amount  and  distribution  in  classes  of  bonds  deposited  on  October 
31,  1911,  and  on  the  average  profits  shown  by  the  preceding  calcu- 
lations : 

Amount  on  deposit  Profit  per  Total 

to  secure  circu-  annum  on  each  profit  per 

Class  of  bonds  lation  $100,000  annum 

Consols  of  1930 $593,006,600  $1,349.62  $8,003,335.67 

Loan  of  1925 22,854,300  1,326.25  303,105.15 

Panama  Canal  Loan 80,110,040  1,367.13  1,095,208.38 

Total $9,401,649.20 

According  to  these  computations  of  the  Comptroller  of  the  Cur- 
rency, the  National  Banks  of  the  country  make  or  have  the  oppor- 
tunity to  make  an  annual  profit  of  approximately  $10,000,000  out 
of  the  issue  of  notes  secured  by  the  deposit  of  bonds  over  and  above 
6%  interest  on  the  capital  invested  in  the  bonds  and  over  and  above 
all  taxes  and  expenses  incident  to  the  issue  and  redemption  of  the 
notes.  All  such  charges  for  taxes  and  expenses  have  been  deducted 
prior  to  the  determination  of  the  net  profits  shown  by  the  above 
tables.  This  $10,000,000  is  paid  out  of  taxes  collected  by  the  Gov- 
ernment from  the  people  in  some  form.  For  this  profit  of  $10,000,- 
000  per  annum,  the  National  Banks  at  the  present  time  render  no 
service  to  the  Government  or  the  people  of  the  United  States.  This 
$10,000,000  per  annum  could  be  saved  to  the  Treasury  of  the  United 
States  on  the  issue  of  notes  to  the  same  amount  directly  to  the 
people  under  the  plan  proposed  by  me.  This  saving  could  not  be 
entirely  effected  at  once,  because  the  immediate  application  of  the 
plan  to  existing  issues  of  bonds,  now  so  largely  held  by  National 
Banks,  is  not  advocated. 

Even  if  the  proposed  system  necessitates  some  increase  in  the 
clerical  expenses  of  the  sub-Treasuries  at  the  points  where  the  notes 
are  distributed  to  the  people,  this  increase  ought  to  be  more  than 
offset  by  the  decrease  in  the  clerical  and  administrative  expenses  of 
the  bureaus  at  Washington  where  the  notes  are  prepared  and  dis- 
tributed to  the  National  Banks. 

On  October  31,  1911,  there  w^ere  7,331  National  Banks  in  the 
United  States  with  each  of  which  it  was  necessary  to  conduct  cor- 


NATIONAL    BUSINESS     CONGRESS  203 

respondence  and  keep  accounts ;  for  each  of  which  it  was  necessary 
to  make  different  plates  and  print  different  notes  for  each  denomina- 
tion of  note  issued  by  it,  and  to  each  of  which  it  was  necessary  to 
distribute  notes  when  printed.  National  Bank  Notes  are  author- 
ized in  eight  denominations  of  five,  ten,  twenty,  fifty,  one  hundred, 
five  hundred,  one  thousand  and  ten  thousand  dollars. 

Eight  times  7,331  makes  a  possible  58,648  plates  which  may 
have  been  necessary  for  the  issue  of  National  Bank  notes  to  the 
National  Banks  in  operation  on  October  31,  1911,  under  the  present 
system.  Under  the  system  proposed  by  me,  all  notes  of  each  de- 
nomination will  be  the  same  throughout  the  United  States,  and  there 
will  be  no  expense  of  engraving  the  names  and  designs  of  7,331 
different  banks.  This  makes  ten  engraved  plates  theoretically  pos- 
sible under  the  proposed  system,  as  against  58,648  under  the  present 
system. 

Practically  ten  plates  will  not  be  sufficient  by  reason  of  the  wear 
and  tear  on  the  plate  in  the  engraving  of  a  larger  number  of  notes 
of  each  denomination,  but  this  is  offset  by  the  changes  in  plates  each 
year  under  the  present  system,  due  to  the  organization  of  new  banks 
and  changes  of  names  of  the  old  ones.  During  the  year  ending 
October  31,  1911,  charters  were  issued  to  214  new  National  Banks 
and  the  names  of  9  existing  National  Banks  were  changed.  Notes 
in  eight  denominations  for  223  banks  made  a  possible  1,784  new 
plates  to  be  engraved  during  1911  for  these  214  new  banks  and  9  old 
ones  with  change  of  names. 

It  is  true  that  as  a  matter  of  bookkeeping  expenses  for  plates 
are  charged  to  and  paid  by  the  banks.  But  all  such  expenses  have 
been  deducted  from  the  interest  on  the  bonds  prior  to  the  determina- 
tion of  net  profits  shown  by  the  above  tables.  Practically,  there- 
fore, all  such  charges  for  expenses  are  paid  out  of  taxes  collected 
by  the  Government  from  the  people  in  some  form.  These  facts 
show  that  every  consideration  of  economy  in  expenditure  and  saving 
of  profits  to  the  Government  or  to  the  people,  is  on  the  side  of  the 
proposed  plan  of  notes  to  be  issued  directly  to  the  people. 

Complaint  is  made  that  the  National  Bank  currency  is  not 
elastic;  that  it  does  not  contract  and  expand  with  the  demands  of 
trade  and  business;  that  its  failure  to  contract  and  expand  renders 
the  currency  redundant  when  money  is  "easy,"  and  scarce  when 
money  is  "tight."  The  reasons  for  this  lack  of  elasticity  are  not 
difficult  to  find.     The  present  National  Bank  currency  is  slow  to  ex- 


204  NATIONAL     BUSINESS     CONGRESS 

pand  because  of  the  delay,  trouble  and  expense  necessary  to  have  it 
issued.  The  urgent  demand  may  be  over  before  the  bonds  can  be 
deposited  and  notes  engraved  and  delivered.  It  is  slow  to  contract 
because  of  the  same  difficulties  and  also  because  there  are  no  induce- 
ments to  its  retirement.  There  is  on  the  contrary  every  advantage 
to  the  National  Banks  not  to  retire  their  notes  when  money  is  easy 
and  the  currency  redundant.  If  they  cannot  loan  their  notes  to  ad- 
vantage, they  could  not  loan  their  capital  if  they  had  it.  The  sur- 
render of  the  notes  will  only  enable  them  to  get  back  their  bonds, 
from  which  they  cannot  get  more  than  the  interest  they  receive, 
unless  they  sell  them.  If  they  sell  them,  they  cannot  lend  the  capital 
released  by  the  sale  on  any  better  terms  than  the  currency  which 
they  have  surrendered.  By  keeping  the  currency  even  idle,  if  neces- 
sary, they  retain  the  interest  on  their  bonds  and  have  the  chance  to 
loan  their  currency  whenever  and  at  whatever  rates  they  can. 

These  influences  and  forces  would  all  be  on  the  side  of  elasticity 
under  the  nezv  system.  The  notes  zvould  always  he  ready  and  could 
be  easily  and  quickly  issued  and  retired.  The  inducement  for  their 
issue  would  be  that  money  was  in  demand  for  purposes  of  trade  and 
commerce  and  zvorth  more  than  the  interest  on  the  bonds.  The  in- 
ducement for  their  retirement  would  be  that  money  was  easy  and 
worth  less  than  the  interest  on  the  bonds.  The  facility  of  the  ex- 
change of  notes  for  bonds  and  bonds  for  notes  and  the  suspension  of 
interest  on  the  bonds  while  the  notes  zvcre  in  circulation,  would  pro- 
duce the  very  elasticity  zvhich  the  present  system  lacks. 

GREENBACKS. 

The  extension  of  the  plan  to  another  branch  of  our  paper 
money  would  remove  the  rigid  inelasticity  of  the  United  States  notes 
commonly  known  as  "greenbacks."  These  were  issued  during  the 
Civil  War  in  payment  of  the  expenses  of  the  Government.  They 
are  mere  promises  of  the  Government  to  pay  on  demand  a  stated 
number  of  dollars.  They  were  made  legal  tender  in  order  to  force 
their  circulation  at  a  time  when  the  credit  of  the  Government  was 
low. 

Of  the  large  amount  issued  during  the  Civil  War,  many  were 
retired  and  cancelled  prior  to  May  31,  1878,  when  their  further  re- 
tirement and  cancellation  was  prohibited  by  law.  The  amount  then 
and  now  outstanding  was  and  is  $346,681,016.  Gold  to  the  amount 
of  $150,000,000  is  held  in  the  Treasury  of  the  United  States  as  a 


NATIONAL     BUSINESS     CONGRESS  205 


Reserve  Fund  for  their  redemption  and  for  the  redemption  of  $3,- 
138,000  of  Treasury  notes  of  1890.  The  law  estabhshing  the  pro- 
posed plan  of  United  States  bond  currency  could  bring  the  green- 
backs within  its  provisions.  They  could  be  made  exchangeable  for 
bonds  in  the  same  manner  as  National  notes.  Once  bonds  were  is- 
sued the  greenbacks  could  be  retired  and  cancelled  and  when  the 
bonds  came  back  for  deposit,  the  new  National  notes  could  be  issued 
in  their  place.  This  would  produce  a  uniform  currency  so  far  as  it 
is  based  on  the  faith  and  credit  of  the  Government  and  not  on  the 
deposit  of  gold  and  silver  in  the  Treasury  of  the  United  States  or  on 
the  assets  of  banks. 

Whenever  you  touch  the  greenbacks,  you  raise  the  question  of 
their  quality  as  legal  tender  in  payment  of  public  and  private  debts. 
The  constitutionality  of  making  anything  but  gold  or  silver  legal 
tender,  was  the  subject  of  long  controversy  in  the  courts  and  its 
desirability  is  still  the  subject  of  permanent  controversy  in  the  minds 
of  financiers  and  economists.  The  legal  question  has  been  settled 
by  the  Supreme  Court  of  the  United  States,  which  has  held  that  Con- 
gress has  the  power  to  declare  National  notes  legal  tender  in  the 
payment  of  public  and  private  debts. 

As  an  academic  question,  it  may  be  conceded  that  nothing  ex- 
cept gold  should  be  made  a  legal  tender  in  the  payment  of  debts  so 
long  as  it  is  the  standard  of  value.  Theoretically,  this  is  sound,  but 
practically  it  is  not  as  sensible  as  it  is  sound.  The  people  of  the 
United  States  prefer  to  use  paper  money.  This  is  shown  by  the  fact 
that  on  October  31,  1911,  there  were  gold  certificates  to  the  amount 
of  $997,062,669  outstanding  and  in  circulation.  The  gold  coin  and 
bullion  for  which  these  certificates  have  been  issued  is  on  deposit, 
dollar  for  dollar,  in  the  Treasury  of  the  United  States.  It  lies  there 
in  the  vaults  because  the  people  do  not  wish  to  handle  it  and  carry 
it,  but  prefer  the  paper  evidences  of  its  existence.  There  is  no 
incentive  to  the  deposit  of  gold  and  the  issue  of  certificates  in  place 
of  it,  except  that  of  convenience.  Under  the  present  system  gold 
coin  is  legal  tender,  but  gold  certificates  are  not. 

In  the  practical  conduct  of  business,  it  is  necessary  that  there 
should  be  established  by  law  some  medium  of  exchange  which  a 
debtor  can  conveniently  secure  and  compel  his  creditor  to  accept. 
Contracts  in  writing  may  be  drawn  to  provide  for  payment  in  any 
particular  money  or  standard  of  value,  but  indebtedness  growing  out 
of  ordinary  transactions  is  not  expressed  in  writing,  and  it  is  neces- 


206  NATIONAL     BUSINESS     CONGRESS 

sary  for  the  law  to  prescribe  some  medium  of  exchange  which  shall 
be  accepted  in  payment  by  the  creditor  when  tendered  by  the  debtor. 
In  view  of  the  inconvenience  of  making  gold  coin  the  sole  legal 
tender  in  payment  of  debts  in  the  United  States,  there  is  substantial 
reason  for  giving  that  quality  to  National  notes.  This,  however,  is 
a  matter  of  opinion,  and  does  not  bear  on  the  merits  of  the  proposed 
system  of  National  notes. 

NO  INFLATION  OF  THE  CURRENCY. 

The  proposed  plan  may  be  unthinkingly  criticised  upon  the 
ground  that  it  opens  the  door  for  the  inflation  of  the  currency  with- 
out limit  in  amount  and  with  no  provision  for  its  redemption  in 
gold. 

M^e  are  not  now  proposing  a  new  and  scientific  system  of  cur- 
rency. We  are  dealing  with  the  established  system  of  currency 
which  exists  in  the  country  at  the  present  time.  The  new  plan  must 
he  judged  by  comparison  with  the  present  situation. 

On  October  31,  1911,  there  were  7,331  National  Banks  with  a 
total  capitalization  of  $1,032,632,135.  On  the  same  day  the  total 
outstanding  bonds  of  the  United  States  which  could  be  used  for  cir- 
culation, amounted  to  $913,317,490 — less  than  the  combined  capital 
of  the  National  Banks  by  the  sum  of  $119,314,645.  In  addition  to 
the  bonds  which  could  be  used  to  secure  circulation,  there  were  out- 
standing $49,990,000  Panama  Canal  3%  bonds  of  1911  and  $41,900 
Postal  Savings  2>4%  bonds  from  which  the  circulation  privilege 
had  been  withheld.  The  National  Banks,  therefore,  were  able  to 
secure  authority  to  issue  National  Bank  notes,  secured  by  United 
States  bonds,  to  the  total  amount  of  $913,317,490.  They  had  not 
availed  themselves  of  their  full  privilege  in  this  respect.  The  total 
amount  of  United  States  bonds  deposited  to  secure  circulation  on 
October  31,  1911,  was  $714,170,320.  The  National  Banks,  there- 
fore, could  have  issued  about  $200,000,000  more  National  Bank 
notes  than  they  had  qualified  themselves  to  issue  on  that  date — over 
25%  of  the  total  National  Bank  circulation,  which  clearly  shows  that 
many  National  Banks  did  not  consider  their  present  privilege  suf- 
ficiently valuable  to  cause  them  to  give  to  the  people  as  much  cur- 
rency within  $200,000,000  as  they  might  have  done. 

(The  foregoing  paragraph  does  not  take  into  consideration  the 
fact  that  the  Act  of  May  30,  1908,  authorizes  a  further  issue  of 
Notes  by  the  National  Banks  of  not  over  $500,000,000.     Hence,  on 


NATIONAL     BUSINESS     CONGRESS  207 


October  31,  1911,  the  National  Banks  could  have  issued  Notes  ag- 
gregating $1,413,317,490,  of  which  $913,317,490  could  have  been 
secured  by  U.  S.  bonds  and  $500,000,000  by  State  and  Municipal 
bonds  and  other  assets.) 

If  the  proposed  plan  had  been  in  force  on  the  same  day,  the 
amount  of  National  bond  notes  that  could  have  been  issued  under 
the  new  plan  would  have  been  the  same  as  the  amount  of  National 
bank  notes  that  could  have  been  issued  on  the  security  of  United 
States  bonds  under  the  present  system  with  the  addition  of  $49,990,- 
000,  Panama  Canal  3%  bonds  of  1911,  and  $41,900  Postal  Savings 
Bonds;  in  all  an  addition  of  $50,031,900. 

Any  criticism  of  the  proposed  plan  for  its  lack  of  limit  as  to 
the  amount  of  notes  that  may  now  be  issued,  applies  with  equal 
force  to  the  present  system,  for  although  the  present  issues  of 
United  States  bonds  available  for  circulation  do  not  equal  by  $119,- 
314,645  the  present  combined  capital  of  the  National  Banks,  the  law 
of  ipo8,  which  gives  National  Banks  the  right  to  issue  notes  against 
deposits  of  state,  municipal  and  other  bonds,  raises  the  limit  of  the 
possible  issue  of  National  Bank  Notes  under  the  present  system  to 
the  combined  "capital  and  surplus"  of  the  National  Banks,  now 
about  $1,650,000,000,  zvith  the  $500,000,000  limit  for  "emergency 
currency"  above  referred  to. 

REDEMPTION  IN  GOLD. 

The  question  of  redemption  in  gold  presents  a  more  intricate 
problem,  but  a  critical  analysis  of  the  facts  will  demonstrate  that 
under  the  present  system  the  redemption  in  gold  of  National  Bank 
notes  and  greenbacks  depends  as  a  last  resort  upon  the  ability  of  the 
National  Government  to  sell  bonds  to  procure  the  gold.  National 
bank  notes  are  payable  in  lawful  money  of  the  United  States.  Law- 
fid  money  of  the  United  States  means  gold  and  silver  coin  and 
greenbacks.  The  National  Banks  are  required  to  maintain  in  the 
Treasury  of  the  United  States  a  current  redemption  fund  in  lawful 
money  of  the  United  States  equal  to  5%  of  the  circulation  out- 
standing. Notes  presented  to  the  Treasury  of  the  United  States 
for  redemption  are  paid  from  this  fund.  When  paid  from  this  fund 
they  are  presented  to  the  bank  for  payment.  If  the  notes  are  not 
paid  by  the  bank  the  Government  must  sell  the  United  States  bonds 
which  have  been  deposited  to  secure  their  payment  in  order  to  get 


208  NATIONAL    BUSINESS     CONGRESS 


the  lawful  money — gold  and  silver  coin  and  greenbacks — with 
which  to  pay  them. 

If  paid  in  silver  the  law  of  1900  makes  it  the  duty  of  the  Secre- 
tary of  the  Treasury  to  maintain  the  parity  between  gold  and  silver. 

If  the  National  bank  notes  are  paid  in  greenbacks  only  one  step 
is  necessary  to  get  gold.  The  greenbacks  are  payable  in  gold. 
$150,000,000  in  gold  is  held  in  the  Treasury  of  the  United  States  as 
a  reserve  fund  from  which  to  pay  them  on  demand.  If  the  fund  is 
exhausted,  the  Secretary  of  the  Treasury  has  authority  to  sell  bonds 
to  replenish  it.  This  was  done  on  four  different  occasions  during 
the  second  administration  of  President  Cleveland. 

The  restdt  is  the  same  in  both  cases.  The  ultimate  resource  for 
the  maintenance  of  redemption  of  the  National  Bank  notes  and 
greenbacks  in  gold  is  the  reserve  fund  of  $150,000,000  in  gold  in  the 
Treasury,  backed  by  the  authority  and  ability  of  the  National  Gov- 
ernment to  sell  bonds  to  provide  more  gold  when  needed.  This' 
reserve  fund,  backed  by  the  authority  of  the  National  Government 
to  sell  bonds,  was  the  basis  for  redemption  in  gold  of  $346,681,016 
of  greenbacks  and  $714,170,320  of  National  bank  notes  issued  and 
authorized  to  be  issued  on  October  31,  1911. 

The  same  reserve  fund  can  be  maintained  and  the  same  ability 
to  sell  bonds  and  secure  gold  zuill  exist  under  the  new  system. 

SIMPLICITY  AND  ADAPTABILITY. 

The  proposed  plan  does  not  make  a  radical  change  in  the  char- 
acter of  the  existing  currency,  nor  does  it  in  any  zvay,  deprive  the 
people  of  any  of  the  benefits  titat  can  be  derived  at  present  or  zvhich 
may  be  derived  in  future  from  the  National  Banking  system. 

The  National  Banking  system  gave  to  the  country  two  of  the 
greatest  qualities  of  any  currency — security  and  uniformity.  The 
old  system  of  discrimination  between  different  bank  notes  ceased 
when  every  dollar  in  circulation  rested  on  the  same  basis :  the  credit 
of  the  National  Government.  The  necessity  of  paying  high  rates'  of 
exchange  on  currency  or  surrendering  the  notes  of  distant  banks  at  a 
heavy  discount  ceased  when  every  note  became  as  good  in  one  part 
of  the  Union  as  in  another. 

Federal  supervision  and  examination  stopped  the  creation  of 
fraudulent  banks  and  imposed  such  restrictions  upon  their  activity 
and  supervision  over  their  management,  that  National  bank  failures 
have  been  comparatively  few.     These  great  benefits— security  and 


NATIONAL     BUSINESS     CONGRESS  209 

uniformity  of  note  issues,  saving  of  exchange  and  safety,  are  almost 
inherent  parts  of  a  National  system,  and  a  National  system  of  banks 
under  Federal  supervision  is  essential  in  order  to  produce  them. 

At  the  present  time  the  real  security  back  of  the  National  bank 
notes  are  the  United  States  bonds.  United  States  bonds  are  simply 
the  promise  of  the  Government  to  pay  at  some  time  in  the  future. 
Greenbacks  are  simply  the  promise  of  the  Government  to  pay  on  de- 
mand. The  real  security  back  of  the  present  National  bank  notes 
and  the  present  greenbacks  is  the  credit  of  the  Government.  Under 
the  proposed  new  plan,  the  security  for  all  the  new  notes  will  be  the 
bonds  of  the  United  States ;  its  promise  to  pay  at  some  time  in  the 
future ;  its  credit. 

Many  financiers  and  economists  criticise  the  soundness  of  a 
currency  based  upon  the  credit  of  the  Government  under  any  cir- 
cumstances, but  such  a  currency  exists  as  a  part  of  our  monetary 
system  at  the  present  time,  and  the  proposed  plan  does  not  increase 
or  decrease  tlic  possible  amount  of  currency  based  on  the  credit  of 
the  Government,  unless  the  outstanding  bonds  exceed  the  combined 
capital  of  the  Xational  Banks,  ichich  is  not  nozv  the  case.  The  only 
chanije  proposed  is  that  this  curroicy  shall  be  obtainable  directly  by 
the  people  of  the  United  States,  and  that  the  right  to  receive  notes 
upon  the  pledge  of  United  States  bonds  shall  not  be  an  exclusive 
privilege  granted  oidy  and  for  no  good  reason  to  the  National 
Banks  at  an  aiuiual  expense  of  about  $10,000,000  to  the  taxpayers. 

This  change  in  the  lazi'  zi'ill  not  interfere  zi'ith  the  adoption  of 
any  safe  and  scientific  system  of  banking  currency  based  upon 
assets.  In  fact,  the  separation  of  the  business  of  issuing  currency 
based  upon  the  credit  of  the  Government  from  the  National  Banks 
and  placing  it  in  the  hajids  of  the  sub-treasuries,  will  probably  clear 
the  field  and  facilitate  the  adoption  of  such  a  system  of  "asset  cur- 
rency" for  the  National  Banks. 

ITS  GENERAL  ACCEPTABILITY. 

If  the  subject  is  examined  free  from  preconceived  prejudices, 
there  appears  to  be  no  substantial  ground  of  opposition. 

Those  interested  in  the  subject  may  be  divided  into  four 
classes : 

(Ay     The  Government. 
(B)     The  National  Banks. 


210  NATIONAL     BUSINESS     CONGRESS 

(C)  State  Banks,  Savings  Banks,  Trust  Companies  and  Pri- 
vate Banks. 

(D)  Individuals. 

There  appears  to  be  no  reason  why  any  of  these  groups  should 
oppose  the  prompt  adoption  of  the  proposed  plan. 

(A)  The  government  will  derive  a  great  advantage  in  creating 
and  maintaining  a  market  among  the  people  for  United  States 
bonds,  which  does  not  now  exist. 

(B)  The  National  Banks  can  have  no  sound  reason  for  ob- 
jecting to  the  proposed  plan.  It  does  not  work  any  injustice  to 
them  or  injure  their  present  investments  in  United  States  bonds. 
So  far  as  it  will  have  any  effect  on  the  value  of  existing  issues  of 
United  States  bonds,  it  will  tend  to  enhance  their  value,  as  it  confers 
a  valuable  privilege  and  thereby  increases  the  value  of  all  United 
States  bonds.  From  this  point  of  vieiv,  tlie  proposed  plan  should 
deeply  interest  and  receive  the  approval  of  the  National  Banks, 
which  on  October  31,  1911,  owned  $691,440,040  of  the  2%  Bonds, 
out  of  a  total  of  $730,882,130,  more  than  94^^%  of  the  total  issue. 
The  future  value  of  2%  bonds  is  problematical,  in  viezv  of  the 
change  zvhich  is  taking  place  in  the  rate  of  interest  on  all  gover)i- 
ment  bonds. 

(C)  According  to  the  last  report  of  the  Comptroller  of  the 
Currency,  15,950  financial  institutions  in  the  United  States  other 
than  National  Banks  made  reports  to  the  Department.  These  were 
divided  into  12,166  State  Banks,  638  Mutual  Savings  Banks,  1,121 
Stock  Savings  Banks,  934  Private  Banks  and  1,091  Loan  and  Trust 
Companies.  All  of  these  financial  institutions  throughout  the  United 
States  should  be  in  favor  of  the  proposed  plan,  as  it  gives  them  the 
right  to  secure  currency  in  direct  exchange  for  whatever  amount  of 
their  capital  they  may  find  it  convenient  to  invest  in  United  States 
bonds. 

(D)  Individuals  should  be  in  favor  of  it  because  it  affords 
them  a  practical  and  economical  means  of  converting  part  of  their 
invested  capital  into  currency  at  a  maximum  of  convenience  and  a 
minimum  of  loss. 

So  long  as  the  National  Banks  hold  any  bonds  nozv  used  as 
security  for  circulation,  the\  will  continue  to  enjoy  all  their  rights 
and  privileges  as  banks  of  issue  in  reference  to  those  bonds.  Their 
special  privileges  as  banks  of  issue  will  be  gradually  extinguished  by 
the  lapse  of  time  and  the  extension  of  the  new  system.     The  pro- 


NATIONAL     BUSINESS     CONGRESS  211 

posed  plan  docs  not  take  from  them  any  rights  or  privileges  they 
tioci'  possess,  but  simply  extends  to  any  holder  of  United  States 
bo}ids,  upon  less  favorable  conditions,  the  same  privilege  now  ex- 
clusively held  by  the  National  Banks. 

In  the  opinion  of  the  author,  suitable  lcgislatio)i  for  the  adop- 
tion of  this  plan  making  United  States  bonds  rcconvertible  into 
bonds  and  currency,  at  the  option  of  any  holder  during  the  life  of 
the  bonds,  is  in  every  zi'ay  desirable  and  zi'ill  be  highly  favorable  to 
all  public  and  private  interests. 

I  am  very  much  obliged,  gentlemen,  for  your  kind  attention. 
It  has  been  a  dry  subject,  but  I  hope  some  of  us  have  profited  by  it. 
(Applause.) 

The  Chairman:  The  subject,  in  my  judgment,  is  a  very  live 
one,  and  I  am  sure  we  will  be  glad  to  hear  any  discussion  on  the 
subject. 

Mr.  Hirshheimer:  I  agree  with  the  gentleman.  The  only 
thing  I  w^ould  like  to  ask  him  is  how  is  a  business  man  going  to  get 
these  bonds  and  lay  them  up?    The  business  man  is  the  power. 

Mr.  Jones  :  I  am  delighted  to  have  anybody  ask  me  questions 
and  delighted  to  answer  any.  The  business  man  can  only  get  bonds 
by  buying  them, 

Mr.  Hirshheimer:     Yes,  and  using  up  his  capital. 

Mr.  Jones  :  He  can  buy  them  at  the  present  quoted  prices, 
because  there  are  always  some  for  sale.  Or  wait  until  the  Govern- 
ment makes  a  new  issue ;  they  will  be  issued  right  along,  and  with 
my  plan  W'Orked  out  he  can  take  as  many  as  he  wants.  Those  are 
the  only  ways  he  can  acquire  bonds,  anyhow ;  they  will  never  be 
given  to  him. 

Mr.  Hirshheimer:  How  is  he  going  to  have  them  except  by 
taking  it  out  of  his  capital? 

Mr.  Jones  :  He  is  not  going  to  do  it  except  by  taking  it  out 
of  his  capital.  Isn't  it  better  for  him  to  insure  against  a  pinch,  and 
isn't  it  better  for  him  to  have  a  certain  per  cent  of  his  capital  in- 
vested at  three  per  cent  when  he  don't  want  it,  and  at  any  time  he 
does  want  it,  instead  of  having  it  with  the  banks  for  the  same  pur- 
pose, able  to  get  it  when  he  does  want  it  ? 


212  NATIONAL     BUSINESS     CONGRESS 

Mr.  Hirsiiiieimer:  The  active  business  man  has  no  capital 
outside  of  what  he  uses.  He  is  the  largest  borrower  of  money  in 
this  country. 

■Mr.  Jones:    But  he  has  a  bank  balance. 

Mr.  Hirshiieimer:  When  he  has  a  bank  balance;  yes.  He  has 
to  have  credit.    Credit  is  his  capital. 

Mr.  Jones:     Yes. 

Mr.  Hirshiieimer:  H  he  ties  up  his  capital  and  puts  it  away 
at  three  per  cent.  Suppose  we  had  $500,000  worth  of  paper  and 
$10,000  of  bonds ;  that  would  be  a  bagatelle ;  you  could  not  get 
enough  money  with  that. 

Mr.  Jones:  My  dear  sir,  if  a  man  has  not  the  money,  I  don't 
know  of  any  scheme  to  give  it  to  him. 

Mr.  Hirshiieimer:     No. 

Mr.  Jones  :  I  am  only  proposing  a  plan  whereby  a  man  who 
has  money  and  is  willing  to  finance  himself  along  safe  lines  can  do 
it  without  fear  of  being  pinched  at  a  certain  time  by  a  money  trust. 
I  am  not  proposing  a  plan  that  gives  anybody  money  that  has  not 
any. 

Mr.  Hirshiieimer:  No.  A  man  cannot  go  into  business  unless 
he  has  money  and  has  capital,  but  I  do  not  think  it  good  policy  for 
a  business  man — and  they  are  the  largest  borrowers. 

Mr.  Jones:    Yes. 

Mr.  Hirshheimer:  To  tie  up  the  money  in  something  that 

]\Ir.  Jones  :  Well,  my  dear  sir,  that  is  a  matter  of  his  own 
choice. 

Mr.  Hirshheimer:  His  own  choice?  No;  it  is  not  his  own 
choice.  A  business  man  at  certain  times  of  the  year  is  the  largest 
kind  of  a  borrower. 

Mr.  Jones:    Yes. 

Mr.  Hirshheimer:  Borrows,  perhaps,  fifty  per  cent  of  his  total 
capital.  Now,  if  he  puts  away  even  ten  per  cent  of  capital  in  his 
bonds,  he  would  have  to  borrow  ten  per  cent  of  that  from  some- 
body else. 


NATIONAL     BUSINESS     CONGRESS  213 


Mr.  Jones  :  I  am  not  ofifering  something  compulsory.  I  am 
offering  an  opportunity. 

Mr.  Hirshheimer:  I  understand  this  is  not  compulsory  upon 
anybody,  but  I  want  to  know  how  is  that  going  to  work  out  with  the 
business  man? 

Mr.  Jones:  If  he  has  not  any  money,  it  is  not  going  to  touch 
him. 

Mr.  Hirshheimer:  Then  he  is  the  man  that  does  the  business 
of  this  country. 

Mr.  Jones  :  Well,  but  there  are  hundreds  of  thousands  of  peo- 
ple in  this  country  with  deposits  and  investments  who  need  money, 
and  yet  are  not  active  business  men. 

:\Ir.  Hirshheimer:  Those  are  the  fellows  that  will  get  those 
bonds,  but  how  is  the  business  man  going  to  get  those  bonds  when 
he  wants  them?  He  cannot  go  out  and  borrow  them  of  people  who 
have  them  laid  up. 

Mr.  Jones:  You  can  always  borrow  bonds  if  you  put  up  their 
value. 

Mr.  Hirshheimer:  We  can  always  borrow  money  if  we  put 
up  its  value. 

Mr.  Jones  :    Not  always. 

]\Ir.  Hirshheimer:     Yes. 

Mr.  Jones  :    I  have  seen  the  time  when  we  could  not. 

Mr.  T.  M.  Sechler:  Let  the  man  who  has  those  bonds  put 
them  up  and  get  the  currency  and  loan  it  to  you. 

]\Ir.  Hirshheimer:  Those  people  who  hold  those  bonds  are  the 
most  suspicious  people  in  the  world.  They  come  to  you  and  loan 
you  money,  but  if  you  want  to  go  to  them  and  borrow  money  they 
would  say :    "You  are  hard  up ;  I  guess  I  will  keep  my  bonds." 

Mr.  Jones  :  My  dear  sir,  I  cannot  provide  a  panacea  for  every 
situation.  I  cannot  provide  for  badly  organized  business  men's  af- 
fairs ;  I  cannot  do  that,  but  I  can  give  him  the  right  not  to  be 
pinched  in  a  famine.  I  have  been  in  Wall  Street — I  have  seen  times 
when  you  could  not  get  money  for  your  payrolls ;  I  have  paid  as 


214  NATIONAL     BUSINESS     CONGRESS 

much  as  six  per  cent,  and  glad  to  get  it  at  that,  for  my  customers; 
you  could  not  make  their  payrolls  in  checks.  I  was  glad  to  get  it. 
Clearing  house  checks,  also.  The  difference  between  the  percentage 
being  the  difference  in  value  between  a  clearing  house  check  and 
the  price  of  the  actual  currency.  I  guess  there  is  no  one  in  this 
room  who  has  not  experienced  it. 

Mr.  Hirsiiiieimer:  I  am  talking  about  a  business  man  who 
uses  all  his  capital  in  his  business. 

Mr.  Jones  :  This  does  not  touch  him.  They  are  the  men  who 
borrow  the  money  and  pay  the  interest. 

Mr.  Hirshiieimer:     Let  us  let  it  alone. 

Mr.  Jones:  You  would  want  this  man  to  go  out  of  business, 
then? 

J\Ir.  Hirshheimer  :  No  ;  it  does  not  afifect  anything  that  exists 
now. 

Mr.  Jones:  The  sub-treasury  should  always  have  on  hand 
bonds  which  need  not  be  larger  than  notes,  and  notes  to  issue 
against  those  bonds,  just  the  same  as  the  Postoffice  Department  now 
has  blank  forms  to  give  you  the  minute  you  make  out  your  order. 

A  Delegate:  The  Government  has  given  a  discount,  at  99 ^>, 
when  bonds  afterwards  sold  at  103  to  a  banker,  and  I  want  to  ask 
for  what  reason  was  that  discount? 

Mr.  Jones:  If  the  Government  is  putting  out,  as  it  did  last 
spring,  50.000,000  of  Panama  Canal's  3s.  on  which  it  got  a  trifling 
premium,  and  practically  all  of  which  went  into  the  hands  of  finan- 
cial institutions,  because,  bear  you  in  mind,  that  over  79  per  cent  of 
the  entire  outstanding  bonded  indebtedness  of  this  country  today  is 
in  the  hands  of  the  National  Banks,  and  there  is  a  lot  of  it  in  the 
hands  of  insurance  companies  and  other  big  corporations  which  we 
cannot  trace.  I  do  not  believe  that  the  citizens  today  hold  five  per 
cent  of  the  national  government  debt.  They  do  not  do  it  for  two 
reasons :  The  currency  privilege  has  made  bonds  so  high,  and  the 
small  per  cent  that  is  paid,  the  small  person  around  the  country  does 
not  want  to  pay  a  high  premium  for  a  low  interest  bearing  bond, 
and  they  have  no  opportunity  of  getting  them  at  first  hand.  I  claim 
the  government  would  be  strengthened  with  our  people  if  they  would 


NATIONAL     BUSINESS     CONGRESS  215 

do  as  they  do  in  France  and  some  of  the  other  European  countries ; 
if  they  would  say  we  don't  want  a  paltry  1^  per  cent  by  selling 
these  to  a  syndicate.  We  are  going  to  sell  them  and  let  them  make 
the  1^.  That  is  the  reason  you  buy  them,  and  it  is  going  to  dis- 
tribute the  Government  debt  and  find  a  direct  market  with  the  peo- 
ple ;  and  by  doing  that  we  would  have  better  citizens. 

That  is  why  I  advocate  the  present  system  should  be  done  away 
wath,  and  it  should  be  first  come  first  served ;  the  smallest  bidder 
first,  those  who  order  one  or  two  or  three  hundred.  In  that  way 
you  distribute  the  bonds  in  the  hands  of  the  people  and  they  get 
something  on  which  they  have  a  profit,  and  then  there  will  be  very 
few  w^ho  want  to  sell  them;  speculators  cannot  make  that  profit  if 
they  are  allotted  to  the  smallest  subscriber  first,  at  par. 

A  Delegate  :  I  was  very  much  in  sympathy  with  the  gentle- 
man's idea,  but  I  wanted  to  know  whether  it  was  to  prevent  Wall 
Street — and  the  gentleman  does  not  need  to  think  my  remarks  are 
directed  at  him. 

Mr.  Jones  :    Any  Wall  Street  man  is  open  to  suspicion. 

A  Delegate:  But,  of  course,  gentlemen,  it  comes  back  to  the 
question  that  this  is  a  moral  question.  We  are  supposed  to  have  a 
government  for  the  people,  but  we  have  a  government  for  the  peo- 
ple in  Wall  Street,  and  the  brokers  and  financial  men.  I  have  repre- 
sented corporations  all  my  life. 

AIr.  Jones:  Pardon  me.  I  have  been  for  many  years  a  mem- 
ber of  the  New  York  Stock  Exchange.  I  am  one  of  those  men 
upon  whom  you  look  with  holy  horror.  There  are  1,100  of  us  and, 
to  mv  mind,  they  constitute  one  of  the  most  honorable  bodies  of 
men  in  the  world,  but  much  maligned.  The  members  of  the  Stock 
Exchange  do  not  originate  anything.  They  are  simply  the  agents 
of  the  fellows  who  do.  When  we  execute  an  order  to  buy  or  sell 
stocks  we  get  the  order  over  a  telephone,  and  we  neither  know  or 
care  from  whom  it  comes.  We  are  looking  for  the  yi  commission. 
Those  men  are  simply  men  there  trying  to  make  a  living  at  $12.50 
for  every  time  they  buy  or  sell  100  shares  of  stock.  I  am  always 
glad  to  lift  my  voice  in  their  favor  when  I  have  an  opportunity. 

This  plan  of  mine  does  not  increase  the  volume  of  currency  in 
any  way.  In  the  first  place,  the  national  banks  can  now  issue  cur- 
rency on  all  of  the  Government  bonds  except  about  60.000.000  odd. 


216  NATIONAL     BUSINESS     CONGRESS 


The  50,000,000  of  the  recent  Panama  issue  from  which  they  with- 
drew it  because  it  would  have  depreciated  the  2's.  All  government 
bonds  have  today  the  same  ]M-ivilege  except  the  60,000.000  odd. 
You  will  see  the  actual  figures  in  the  treatise  of  mine,  and  it  does 
not  increase  the  possibility  of  one  dollar  of  currency  over  what  the 
National  Banks  could  issue  now  if  they  all  availed  of  the  privilege. 
It  simply  goes  right  to  the  elasticity  of  the  currency  in  the  hands  of 
the  individuals  without  the  intervention  of  a  national  bank. 

For  instance,  if  you  had  10,000  of  government  bonds  today 
you  cannot  get  any  currency  on  them,  but  you  can  hand  them  to  the 
national  bank  and  it  can  loan  you  the  currency.  The  fact  that  you 
are  getting  it  through  them  does  not  in  any  way  increase  the  pos- 
sible volume  of  currency,  which  is  limited  to  the  outstanding  of 
United  States  bonds  in  any  case.  The  outstanding  amount  of 
United  State  bonds  is  smaller  today,  by  several  hundred  millions, 
than  the  combined  capital  of  all  the  national  banks,  and  yet  all  the 
national  banks  are  allowed  by  law  to  issue  circulation  up  to  the  full 
amount  of  their  capital,  which,  at  the  present  day,  is  several  hun- 
dred million  dollars  more  than  all  of  the  United  States  bonds  out- 
standing. So  that  you  can  see  that  you  could  today  issue  three  or 
four  hundred  million  dollars  of  bonds,  and  the  national  banks  could 
issue  currency  against  them,  too.  It  is  not  inflation,  but  simply  a 
change. 

Mr.  Sechler:  How  would  you  make  currency  elastic  with- 
out you  inflate  it? 

Mr.  Jones:    Elasticity  is  not  inflation. 

Mr.  Sechler:  If  you  draw  on  the  treasury  in  exchange  for 
the  bonds  you  are  simply  reducing  the  amount  of  currency  in  the 
treasury. 

Mr.  Jones:    Yes. 

Mr.  Sechler:  You  are  not  increasing  one  dollar  the  money 
that  the  country  is  wanting. 

Mr.  Jones:  No.  That  is  left  open  for  a  plan  of  asset  cur- 
rency, such  as  the  Aldrich  Bill  and  others  are  providing  for.  What 
I  propose  does  not  inflate  the  currency  one  dollar,  but  it  does  give 
you,  if  you  have  $1,000  or  $1,000,000,  the  right  to  have  the  interest 
on  the  bond  when  vou  do  not  need  the  money. 


NATIONAL     BUSINESS     CONGRESS  217 

Mr.  Sechler:  You  have  not  added  one  dollar  to  the  cur- 
rency. 

Mr.  Joxes:  Xo.  sir.  I  am  not  preaching  inflation.  I  am 
preaching  elasticity.  I  am  not  proposing  to  add  to  the  store  of  mon- 
ey. I  am  only  proposing  that  if  I  have  the  same  security  as  a  na- 
tional bank,  or  if  I  am  a  trust  company  or  a  state  bank  I  can  do  the 
same  as  they  can.  Furthermore,  I  am  not  proposing  to  take  the 
privilege  away  from  them. 

The  Chairman  :  Gentlemen,  it  is  now  nearly  half  past  one 
and  there  is  another  short  paper  to  be  read  and  then  the  resolu- 
tions. Xow  this  room  must  be  cleared  at  4 :30  for  the  banquet. 
Therefore,  it  is  absolutely  necessary  for  us  to  convene  sharp  at  2  :30, 
and  we  will  have  to  work  very  hard  to  get  through. 

On  motion,  duly  seconded,  an  adjournment  was  taken  till  2  :30 
o'clock  P.  ^I. 


218  NATIONAL     BUSINESS     CONGRESS 


SIXTH  SESSION. 


Wednesday,  December  13,  1911. 
2  :30  o'clock  P.  M. 


The  Chairman  :  We  have  a  paper  here  from  Mr.  Robert 
Dollar,  not  on  the  program,  and  Mr.  Nye  will  kindly  read  that 
paper. 

Mr.  James  W.  Nye  :  "The  American  Merchant  Marine,  in 
Our  Foreign  Trade." 

Address  by  Robert  Dollar,  President  of  the  Robert  Dollar  Com- 
pany, Oriental  Steamship  Lines,  San  Francisco. 

]\Ir.  Chairman  and  ^Members  of  the  National  Business  Congress: 

I  read  on  your  letterhead  the  following :  "American  ships, 
American  built,  American  manned  for  American  commerce." 

Theoretically,  this  is  right  and  with  all  of  it  I  agree,  pro- 
vided it  can  be  carried  out,  but  I  claim  that  it  is  utterly  impracti- 
cable for  the  following  reasons : 

First,  in  the  building  of  ships  or  first  cost,  our  politicians  and 
others  who  do  not  know,  or  those  who  willfully  distort  the  truth, 
all  tell  us  that  it  only  costs  25%  to  30%  more  to  build  ships  in  an 
American  yard  than  in  a  British  yard.  What  are  the  facts  ?  I  have 
just  built  a  steamer  in  Scotland  423  feet  long,  54  feet  beam,  with  en- 
gines of  2,500  horse  power,  and  of  8,880  tons  dead  weight  capacity. 
The  price,  ready  for  sea,  was  $250,000.00.  Inquiry  from  American 
yards  brought  out  the  information  that  it  could  not  be  built  for  less 
than  $600,000.00.  Now  to  build  this  vessel  in  an  American  yard, 
and  to  permit  her  to  meet  the  keen  competition  in  the  foreign  trade, 
Congress  must  pay  the  builders  a  subsidy  of  $350,000.00.  I  need 
not  ask  you,  will  they  do  it?  The  answer  is  plain  on  the  face  of  it: 
They  zvill  not. 

Then  after  we  get  the  American  ship,  we  are  met  with  as  great 
obstacles  in  the  way  of  increased  operating  expenses.  I  will  again 
leave  the  realm  of  theory,  which  so  many  discussing  this  subject 
resort  to,  and  get  down  to  actual  results.  The  American  steamers, 
"Hyades"  and  "Pleiades,"  5,000  tons  capacity,  one  year's  cost  to 
operate  for  wages  and  board,  each,  $39,940.00  The  British  steam- 
ers,  "Bessie  Dollar"   and   "Hazel  Dollar,"   wages  and  board   one 


NATIONAL     BUSINESS     CONGRESS  219 

year,  $16,000.00  each,  an  excess  of  $16,940.00  a  year  on  wages  and 
board  alone.  Again  I  ask  who  is  going  to  pay  the  American  ship- 
owner this  amount  to  enable  him  to  meet  the  world's  competition? 
If  any  one  disputes  those  figures,  I  can  give  detailed  information 
from  my  books  and  those  of  the  Boston  Tow  Boat  Co. 

Then  we  have  to  count  on  our  Government  regulations  and 
restrictions,  which,  during  the  course  of  a  year,  run  into  a  lot  of 
monev.  By  our  method  of  measuring  ships,  we  are  compelled,  in 
foreign  ports,  to  pay  from  307o  to  357c  more  for  dockage,  pilotage, 
dry  docking,  and  all  charges,  that  are  based  on  the  ship's  measure- 
ment.   For  example : 

The  net  British  measurement  of  the  "Hazel  Dollar"  is  2,803  T. 
The  net  American  measurement  of  the  "Hazel  Dollar"  is  3,582  T. 
The  net  British  measurement  of  the  "Bessie  Dollar"  is  2,797  T. 
The  net  American  measurement  of  the  "Bessie  Dollar"  is  3.679  T. 

I  have  tried  to  find  out  the  reason  of  penalizing  our  ships  in 
foreign  countries,  but  have  failed  to  get  any  satisfactory  reply.  I 
have  been  told  by  Government  officials  that  they  know  how  to  meas- 
ure a  ship,  and  require  no  instructions  from  foreigners.  With  this, 
and  many  other  unjust  discriminations,  our  ^Merchant  ^Marine  in 
the  Foreign  trade  has  been  legislated  off  the  ocean. 

Then  in  the  manning  of  American  vessels,  we  are  compelled  to 
carry  useless  men.  I  use  this  term,  as  no  other  nations  have  to  carry 
them.  One  extra  engineer,  3  oilers,  and  3  water  tenders.  The 
three  last,  even  the  name  is  unknown  in  foreign  freight  steamers. 
Those  seven  men  cost,  wages  and  board,  $6,000.00  a  year. 

I  will  not  trouble  you  with  the  unreasonable  exactions  of  our 
Inspection  requirements,  which  no  other  nation  requires :  they  would 
fill  a  page  of  themselves,  and  many  important  and  vital  requirements 
are  left  out,  so  that  our  Inspection  regulations  require  to  be  re- 
modeled from  top  to  bottom. 

In  view  of  the  foregoing,  I  say  that  under  existing  conditions 
and  laws,  an  American  ^Merchant  Marine  to  engage  in  the  foreign 
trade  is  impossible.  A  half  loaf  is  better  than  no  bread,  and  I  claim 
that  the  only  way  we  can  get  a  Merchant  Marine  is : 

First— To  allow  us  to  buy  our  ships  where  we  can  get  them 
the  cheapest. 

Second — Permit  us  to  man  them  as  our  competitors  do. 


220  NATIONAL     BUSINESS     CONGRESS 


Third — Change  our  laws  and  regulations  to  conform  to  those 
of  our  competitors,  preferably  to  those  of  Great  Britain,  under 
whose  flag  more  than  half  of  the  steam  tonnage  of  the  world  is 
operated. 

I  would  remind  you  that  it  is  not  lack  of  enterprise  of  our  ship- 
owners that  has  brought  us  to  the  humiliating  position  we  find  our- 
selves in,  as  I  have  a  list  of  ships  owned  by  American  citizens  and 
flying  the  foreign  flags  amounting  to  1,452,716  gross  tons.  This 
amounts  to  nearly  6%  of  the  entire  steam  tonnage  of  the  world,  and 
the  last  report  of  our  vessels  in  the  foreign  trade  had  dwindled  down 
to  less  than  600,000  tons.  You  will  all  admit  that  it  is  dangerously 
near  the  vanishing  point.  Did  it  ever  occur  to  you  that,  only  for  the 
Southern  Pacific  Railroad  operating  five  steamers,  and  the  Hill 
Lines,  operating  the  Minnesota,  there  would  not  be  an  American 
steamer  on  the  Pacific  Ocean  flying  the  American  flag?  The  rail- 
roads appear  to  be  able  to  run  them.  Private  individuals  or  private 
corporations  could  not. 

Statistics  show  us  that  our  manufactures  are  increasing  much 
faster  than  domestic  consumption.  Therefore,  we  must  develop 
and  extend  our  foreign  commerce.  I  claim  this  will  never  be  done 
on  a  large  scale  without  our  own  ships,  so  we  must  find  a  way  of 
getting  vessels.  We  must  do  something,  and  at  once.  You  should 
demand  of  Congress  to  enact  laws  at  this  session  to  accomplish  the 
desired  results.  On  this  trip  I  am  making  to  oriental  countries,  I 
know  that  outside  of  the  Railway  steamers.  I  will  never  see  the 
American  flag  on  a  vessel  in  the  foreign  trade.     (Applause.) 

The  Chairman  :  Gentlemen,  is  there  any  discussion  on  this 
paper  ? 

Mr.  Ewell:     Where  was  it  sent  from? 

Mr.  Nye:  From  a  steamer  on  the  Pacific  Ocean,  on  which 
I\Ir.  Dollar  was  traveling.    It  was  sent  to  Secretary  Burnham. 

Mr.  Ewell:  Do  I  understand  that  Mr.  Dollar  is  a  ship  builder 
in  the  United  States? 

The  Chairman:  Of  San  Francisco.  Mr.  Dollar  is  in  the 
lumber  business.  He  is  quite  a  prominent  man  along  that  line.  Did 
you  care  to  speak,  Mr.  Ewell? 


NATIONAL     BUSINESS     CONGRESS  221 

]\Ir.  Ewell  :  Xo.  I  shall  not  say  anything  at  the  present  time. 
I  shall  be  glad  to  refer  to  some  of  the  points  made  in  the  paper,  at 
the  banquet,  to-night. 

The  Chairman'  :     You  can  see  the  paper  if  you  like. 
The    matter  of  the  Resolutions  Committee  is  the  next  in  order. 
Is  the  Resolutions  Committee  ready  to  report? 

Mr.  Frost:  !Mr.  Chairman,  your  Resolutions  Committee  held 
quite  a  number  of  sessions  and  considered  quite  a  number  of  resolu- 
tions that  were  presented  and  the  Chairman  of  that  Committee,  for 
the  Committee,  wishes  to  thank  the  members  for  the  scope  and 
character  of  the  resolutions  submitted  to  them.  They  were  far- 
reaching  in  their  efforts,  and  all  of  them  show  a  result  of  careful 
preparation,  and  showed  that  considerable  time  had  been  devoted 
to  them,  and  their  purpose  was,  beyond  question,  to  formulate  such 
principles  as  business,  commercial  and  industrial  organizations  stand 
for  to-day.  and  demand.  They  were  broad  and  generous  in  their 
scope,  and  vet  your  Committee,  after  hours  of  discussion,  found 
that  to  formulate  them  in  the  way  in  which  their  importance  and 
their  character  demanded,  and  the  intelligence  displayed  in  this  Con- 
gress required,  was  an  undertaking  beyond  the  possibility  of  a 
successful  conclusion  by  the  Committee,  in  view  of  its  lack  of  time 
and  the  importance  of  the  resolutions,  because  it  clearly  appeared  at 
the  start  that  the  Committee  was  not  supposed  to  bring  back  any 
glittering  generalities.  It  was  felt  that  the  time  had  come  in  the 
business  development  of  this  country  when  business  men  are  get- 
ting together,  and  when  they  realize  that  the  controlling  and  under- 
lying causes  operating  were  threatening  the  bare  existence  and  the 
perpetuity  of  business.  So  there  was  no  disposition  to  bring  in 
resolutions  that  sounded  well  and  meant  nothing.  It  was  also  felt 
that  a  legislator  or  legislative  body  or  committee  had  a  right  to  ask 
this  Congress  or  any  committee  representing  it,  not  for  general  rec- 
ommendations, but  for  specific  recommendations  aimed  at  particular 
and  prominent  and  important  matters.  To  formulate  a  platform,  to 
formulate  a  policy,  to  formulate  principles  upon  which  business  men 
can  unite,  not  in  any  general  haphazard  manner,  but  with  the  idea  to 
strong  and  forcefully  bring  out  those  principles,  those  platforms  and 
those  ideas  to  the  attention  of  the  people  for  their  support,  and 
require  Congress  to  enact  them  into  laws.     In  order  to  accomplish 


222  NATIONAL     BUSINESS     CONGRESS 


that  it  was  apparent  to  the  Committee,  as  it  must  be  apparent  to  you 
gentlemen,  that  to  do  it  right  it  could  not  be  done  in  a  minute. 

The  Committee  was  up  against  this  proposition:  Should  it 
bring  back  general  endorsements  of  certain  matters?  Or  should  it 
make  an  honest  and  thorough  attempt  at  this  time  to  formulate  the 
principles  for  which  business  men  stand?  And  unanimously  the 
Committee  reached  the  conclusion  that  now  is  the  accepted  time  to 
provide  for  a  declaration  on  the  part  of  business  men  which  would 
mean.. something,  and  now  is  the  time  to  begin  a  movement  which 
would  strike  and  strike  hard,  and,  in  order  to  do  that,  it  felt  that 
the  good  sense  and  intelligence  of  this  Congress  should  be  con- 
served, and  that  more  thought  and  time  than  the  Committee  had 
should  be  devoted  to  the  formulation  and  preparation  of  its  public 
announcement.  Therefore  your  Committee  unanimously  recom- 
mends : 

"Resolved,  That  the  President  of  this  National  Congress  be, 
and  he  hereby  is,  authorized  and  directed  to  promptly  appoint  a  suit- 
able Committee  to  formulate  a  declaration  of  principles  and  pur- 
poses which  will  reflect  the  necessities  and  demands  of  the  com- 
mercial, industrial  and  business  interests  of  the  country;  and  that 
your  Committee  on  Resolutions  be  discharged." 

I  move  the  adoption  of  that  report. 

Which  motion  was  duly  seconded. 

The  Chairman  :     Gentlemen,  is  there  any  discussion  ? 

Mr.  Herbert  E.  Miles  (of  Wisconsin)  :  What  would  the 
effect  of  the  declaration  of  the  Committee  be  upon  the  organizations  ? 
Are  we  to  bind  our  organizations  at  all  after  we  go  home  by  what 
the  Committee  might  declare  ? 

The  Chairman  :  I  will  leave  the  Chairman  of  the  Resolutions 
Committee  to  answer  that  question. 

Mr.  Frost  :  It  was  the  idea  and  the  sentiment  of  the  Commit- 
tee that  if  the  platform  were  formulated  as  to  the  demands  of  busi- 
ness now  required,  it  would  appeal  to  the  good  sense  of  the  business 
men,  and,  therefore,  would  not  be  a  glittering  generality,  and  they 
would  support  it.  I  don't  think  the  technical  question  of  whether 
an  organization  is  bound  enters  into  it,  because,  if  it  had  not  the  real 
weight  that  appeals  to  a  business  man's  intelligence  it  will  not  have 


NATIONAL     BUSINESS     CONGRESS  223 


any  binding  effect  or  force  upon  this  or  any  other  congress.  If  you 
have  not  crystallized  it  in  your  considerations  so  as  to  formulate  the 
desires  of  business  men,  then,  of  course,  there  is  no  use  to  talk  about 
binding  their  judgment.  We  expect  to  bind  their  judgment  and  the 
organizations,  not  because  it  is  what  a  committee  may  recommend, 
but  because  of  the  recommendation  having  inherent  good  common 
sense.    If  it  is  not  so  formulated,  it  is  not  binding  in  any  way. 

Mr.  Gates  (of  Illinois)  :  Alay  I  inquire  whether  it  is  the  pur- 
pose of  the  Committee,  after  this  platform  shall  have  been  formu- 
lated, to  submit  it  to  the  dift"erent  organizations  represented  in  this 
Congress  for  their  approval? 

The  Chairman  :  I  take  it,  from  the  resolution,  ]^Ir.  Gates, 
that  that  is  up  to  the  Committee  for  which  the  resolution  provides. 
That  is  the  intention,  is  it  not,  ]\Ir.  Frost? 

Mr.  Frost  :  Yes.  To  make  it  absolutely  clear,  this  was  the 
idea:  That  if  a  committee  be  appointed  by  this  Congress  which 
reflected  and  crystallized  the  sentiments  of  the  Congress  and  the 
institutions  back  of  the  Congress,  that  that  committee  could  formu- 
late a  statement  of  principles,  a  platform,  a  party  platform,  if  you 
please,  but  a  statement  of  principles  and  policies  which  business  men 
would  unite  upon. 

You  can  see  at  once  that  to  definitely  do  that  you  must  bring 
together  your  manufacturer,  your  merchant,  your  banker,  your 
insurance  man,  your  promoter,  your  developer  of  business,  agri- 
culturist ;  you  must  bring  together  everybody.  While  we  have  no 
way  of  knowing  how  that  committee  would  act,  yet,  unquestionably, 
the  resolutions,  being  drawn  by  men  from  all  parts  of  the  country 
and  from  the  different  industries,  would  reflect  the  business  senti- 
ment, and  those  men  would  be  very  careful  to  inquire  into  all  the 
business     sentiment. 

Just  as  before  the  Resolutions  Committee,  we  have  had  short, 
thoughtful,  deep  study  of  the  many  subjects  upon  which  the  resolu- 
tions were  submitted,  yet  there  have  been  few  men  who  have  arisen 
on  this  floor  who  said  that,  as  a  result  of  their  study,  they  believed 
that  business  at  this  time  demanded  so  and  so;  that  business  de- 
manded legislation  that  would  help  it,  is  what  they  said,  but  they 
did  not  say  whether  the  Sherman  law  should  be  repealed,  modified 
or  enforced.  \Mien  your  Committee  got  together  there  was  one  prac- 


224  NATIONAL     BUSINESS     CONGRESS 

tical  matter  to  get  a  resolution,  and  every  member  of  the  Committee 
was  asked:  "What  is  your  judgment  with  reference  to  a  specific 
recommendation  on  the  Sherman  law?"  Each  individual  member 
had  his  own  idea,  but,  you  see,  the  instant  the  Chair  asked  the  mem- 
bers to  reflect  the  judgment  of  the  convention  as  a  member  he  be- 
gan thinking  and  says:  "Well,  this  reflecting  of  the  judgment  of 
the  convention  is  a  very  serious  matter.  I  guess  I  better  inquire 
around." 

If  you  are  all  unanimous,  then  a  resolution  repealing  the  Sher- 
man law  would  be  something  to  act  upon.  I  don't  know  what  the 
state  of  mind  is  here.  To  make  it  specific — a  congressman  has  the 
right  to  ask  that.  When  you  go  before  a  Congressional  Committee 
and  say  that  business  demands  a  certain  thing — what?  Laws  that 
will  help  business?  Why,  bring  on  your  laws  that  will  help  business. 
If  we  cannot  make  them,  nobody  else  can.  If  we  do  not  know  how 
to  draw  the  laws  that  will  be  beneficial  to  our  own  interests,  and  we 
the  business  men  who  expect  to  be  benefited  by  them,  how  do  you 
expect  our  Congressmen  to  do  it  ?  We  have  gone  in  and  said : 
"Hip,  Hip,  Hurrah !  Give  us  a  resolution  that  will  help  business." 
Of  course  we  want  it,  but  what  do  we  want? 

The  Resolutions  Committee  felt  that  an  assembly  like  this  was 
coming  together  just  like  the  thirteen  original  colonies,  harassed 
from  all  points,  and  it  finally  stood  as  the  United  States.  When 
they  started  in  everybody  was  willing  that  the  government  should 
borrow  money.  Every  one  of  the  colonies  said :  "Yes,  let  us  do 
all  we  can."  But  Ben  Franklin  said:  "Who  will  pay  it  back?" 
New  York  says:  "Count  me  out  on  that."  Massachusetts  said: 
"No,  no;  I  cannot  bind  my  constituents."  And  they  went  down  the 
line  and  the  confederacy  went  to  pieces. 

Here  is  the  point:  We  are  willing  and  ready  to  drop  every- 
thing that  does  not  personally  appeal  to  us,  and  stand  together.  If 
it  is  the  Sherman  law,  what  do  you  want?  Do  you  want  it  repealed, 
enforced  or  amended?  And,  if  you  want  it  amended,  how  do  you 
want  to  amend  it?  We  would  lose  all  the  efifect  of  that  if  we  would 
make  some  nonsensical  recommendation  as  to  the  Sherman  law.  Sup- 
pose we  said  to  repeal  it.  When  the  shooting  is  all  done  I  do  not 
believe  there  is  a  man  who  wants  the  Sherman  law  repealed.  He 
will  howl  about  its  efifect,  but  I  have  not  heard  one  business  man 
with  whom  I  have  sat  down  in  a  corner  and  talked,  say:  "Let  us 
wipe  it  oft"  the  books."     Congress  is  entitled  to  have  a  specific  recom- 


NATIONAL     BUSINESS     CONGRESS  225 


mendation,  and  you  cannot  make  specific  recommendations  out  of 
air. 

Your  Resolutions  Committee  were  very  reluctant  to  submit  this 
resolution,  but  we  did  not  think  it  wise  to  submit  a  resolution  as 
long  as  we  felt  that  the  country  had  a  right,  and  we  owe  it  to  busi- 
ness, to  formulate  at  this  time  a  declaration  of  business,  just  as 
when  those  people  gathered  together  in  the  thirteen  colonies,  and 
those  who  remained  at  home  had  a  right  to  expect  Congress  to 
formulate  for  them  a  Declaration  of  Independence  that  they  could 
all  stand  on — and  I  don't  recall  when  that  formulation  occurred  of 
anybody  asking,  in  any  way,  shape  or  form,  whether  that  Declara- 
tion of  Independence  bound  their  constituents  at  home.  Why  ?  Be- 
cause that  Declaration  of  Independence  reached  right  into  the  heart 
of  every  man  in  the  colony,  and  got  together  those  things  on  which 
the  colonists  stood.  It  appealed  to  every  man  who  read  it.  They 
said  :    "These  are  our  sentiments." 

Business  requires  a  declaration  of  that  kind.  The  Resolutions 
Committee  could  not  get  it.  We  do  not  think  there  is  energy,  intelli- 
gence and  character  sufficient  in  the  business  which  can  get  that 
kind  of  a  declaration  within  the  limited  time.  Therefore,  our  Reso- 
lutions Committee  send  it  back  to  this  Congress  to  get  the  men  who 
we  thought,  with  care,  time  and  consideration,  could  get  a  declara- 
tion, which,  when  you  and  I  see  it.  we  will  say:  "That  is  the 
thing."  That  is  what  we  would  stand  by  and  what  we  would  fight 
for. 

While  general  resolutions  are  all  right,  yet  general  resolutions 
do  not  quite  fill  the  bill  when  a  man  is  trying  to  help  you  (and  some 
Congressmen  are),  when  he  says:  "What  do  you  want,  and  why 
do  you  want  it?"  I  have  not  any  doubt  but  what  a  suitable  com- 
mittee can  be  gathered  together,  and  if  they  have  time  enough,  can 
bring  back  the  right  answer,  and  rightfully  and  truthfully  say  to 
Congress  that  business  men  want  no  Sherman  law,  this  or  that  or 
the  other  thing. 

I  might  be  mistaken  about  business  not  wanting  it  repealed,  but 
I  don't  think  so.  It  may  be  amended  or  enforced.  To  formulate 
that  into  a  resolution,  the  men  who  formulate  it  must  either  in 
themselves  reflect  the  wisdom  of  others,  or  must  have  contact  with 
them.  It  might  be  well  for  them  to  have  a  heart-to-heart  talk  with 
people  in  the  different  lines  of  industry,  and  learn  the  things  upon 
which  dififerent  ones  have  reached  definite  conclusions  in  their  own 


226  NATIONAL     BUSINESS     CONGRESS 


mind.  When  a  man  gets  up  on  the  floor  and  says :  "Gentlemen,  I 
have  studied  the  Sherman  law  for  fifteen  years,  and  I  believe  it 
ought  to  be  repealed,"  that  is  something  you  can  stand  on.  When 
a  man  gets  up  or  when  a  resolution  says :  "Well,  I  think  it 
ought  to  be  enforced,  or  business  ought  to  be  better;  I  don't  know 
whether  you  ought  to  have  this,  that  or  the  other  thing,"  you  cannot 
stand  on  that;  it  only  adds  to  your  complexities.  You  men  here, 
whatever  ideas  you  may  have  on  any  subject,  if  you  believe  we 
ought  to  have  a  merchant  marine  and  own  our  ships,  say  so  and 
give  us  your  convictions  on  it.  If  you  are  just  traveling  around  in 
the  air,  discussion  is  good ;  but  it  is  too  early  to  formulate  anything 
until  your  ideas  shall  have  been  crystallized.  A  man's  intelligence, 
his  opportunities,  his  thoughts,  all  aid.  We  need  formulation  as  we 
never  needed  it  before. 

Perhaps  I  say  too  much,  but  I  go  before  a  great  many  Senate 
and  House  and  Legislative  Committees.  Assume  that  one-half  of 
our  legislators  want  to  do  what  they  can.  They  want  to  please  the 
people.  They  would  rather  stay  in  office  and  have  the  people  think 
well  of  them  than  to  have  the  people  scold  them.  You  go  before 
them  and  they  say:  "What  do  you  want?"  That  is  where  labor 
teaches  us  a  very  important  lesson.  They  go  down  before  the 
Legislature  at  Springfield,  and,  suppose  it  is  a  question  of  boiler 
inspection;  there  is  no  reason  under  the  sun  why  there  should  be  a 
State  inspection  of  boilers,  in  view  of  the  municipal  regulations,  but 
they  go  down  there  and  there  is  a  laboring  man  there  who  says: 
"You  ought  to  have  boilers  inspected."  He  hasn't  any  doubt  about 
it.  Well,  he  says:  "Jones,  what  do  you  think  about  it?"  "Well, 
I  don't  know.  Why  does  my  friend  want  them  inspected?"  Well, 
by  and  by  they  find  out  why  they  want  them  inspected.  He  is  not 
telling  that,  but  finally  the  law  is  passed.  Four  or  five  years  after- 
wards there  may  be  an  inspection  of  boilers  by  the  State.  Then  he 
wants  an  efficient  inspection.  When  he  gets  his  law  passed  you 
will  find  that  an  inspector  can  go  out  in  the  country  and  stop  a  rail- 
road train  to  inspect  the  boiler.  The  possibility  of  stopping  a  rail- 
road train  to  inspect  the  boiler  when  it  is  out  here  with  a  load  of 
passengers  somewhere  in  the  country  is  a  very  vital  thing. 

It  is  a  mighty  good  thing  to  know  exactly  what  you  want  and 
state  what  you  want,  and  Congress  has  the  right  to  ask  it.  We  have 
no  right  to  go  down  there  and  say:  Give  us  a  law  that  will  pay  a 
dollar's  worth  of  debts  and  which  will  only  cost  us  fifty  cents.    We 


NATIONAL     BUSINESS     CONGRESS  227 

have  a  right  to  go  down  there  and  say  that  we  want  a  merchant 
marine,  and  we  are  entitled  to  it.  That  is  a  definite  and  specific 
thing;  we  are  specializing  on  that.  If  we  do  not  specialize  and 
make  a  declaration,  we  are  just  like  other  organizations  that  have 
been  gotten  together,  but  you  know  the  disappointment  and  the 
sorrowful  thing  about  organization;  and  you  all  know  just  as  well 
as  I  do  that  you  so  discuss  matters  that  when  you  are  ready  you 
cannot  knit  them  all  together  and  get  a  definite  action.  That  is  the 
hardest  thing  in  the  world  in  organization,  to  connect  what  you 
want  and  public  sentiment.  I  do  not  believe  that  you  can  connect 
permanently  action  and  public  sentiment  unless  you  are  asking  for 
action  on  those  things  that  are  fundamentally  brought  out  and  which 
are  fundamentally  right.  Is  there  some  committee  of  five  that  can 
go  out  and  draw  them  out  of  the  air  ?  No,  they  have  to  be  brought 
out  of  you  and  me  and  every  other  man.  You  did  not  build  your 
business  in  a  minute.  Today  you  are  trying  to  prescribe  a  course 
for  three  or  four  years  from  now.  You  are  trying  to  develop  a 
principle  on  which  a  problem  for  tomorrow  can  be  developed. 

You  heard  the  message  from  Robert  Dollar,  and  you  know  how 
that  typified  the  condition.  There  was  a  shipper,  according  to  his 
notion  he  had  to  carry  $6,000.00  worth  of  worthless  labor,  and  no 
other  ship  had  to  carry  it.  He  had  to  do  it  because  the  law  de- 
manded it.  His  margin  w^as  closing  down.  It  is  time  when  we  have 
to  formulate  something.  Labor  is  already  formulating  for  the  con- 
trol of  vessels  by  providing  for  the  number  of  men  that  shall  be 
employed  on  steamers  and  the  amount  of  their  pay. 

Some  time  ago  w^e  had  occasion  to  return  forty  or  fifty  Sicilians 
who  were  brought  here  for  show  purposes.  We  went  to  all  the 
steamers  and  they  said  they  could  not  carry  them.  They  had  some 
religious  rites  that  made  a  slight  difference.  They  said :  "We  can- 
not carry  them."  Well,  they  could  not  go  on  first-class  ships,  so 
Avhen  we  went  to  those  great  tramp  steamers,  and  to  the  United 
States  Government  they  said :  "If  you  take  these  men  on  your  ship, 
sixty  of  them,  you  have  to  make  structural  changes  on  your  ship; 
that  will  cost  $17,000.00."  We  had  to  get  them  out  of  the  country, 
and  when  we  went  out  of  the  country  they  said  to  the  ship-owner: 
"No,  you  cannot  do  it  unless  you  make  structural  changes  in  order 
to  give  them  more  air."  Labor  has  filled  up  the  laws  with  reference 
to  the  operation  of  vessels,  because  they  have  definite  and  specific 
recommendations.    We  are  not  fighting  labor.    This  is  no  time  for 


228 


NATIONAL     BUSINESS     CONGRESS 


fighting;  this  is  the  time  to  get  to  the  markets  of  the  world.  What 
we  want  is  to  formulate  the  things  that  we  want.  We  want  to  show 
people  how  bad  conditions  can  be  overcome. 

In  reference  to  this  declaration  of  principles,  if  we  can  make 
the  kind  of  declaration  that  we  ought  to  make  I  think  it  would 
appeal  to  the  good  sense  of  the  business  men  of  the  country;  and 
we  will  have  a  great  big  number  of  men  who  simply  say  to  Con- 
gress :  We  want  this  or  that,  and  we  will  get  it.  But  we  have  no 
right  simply  to  unload  duties  on  a  Congressman — assuming  that  he 
is  a  half-way  honest  Congressman — to  add  to  the  present  perplexi- 
ties he  has.  If  they  agree  that  the  resolution  offered  by  the  Resolu- 
tions Committee  should  be  adopted 

The  Chairman:  The  resolution  of  the  Committee  is  rather 
vague.  The  resolution  asks  the  Chairman  to  appoint  a  committee. 
It  does  not  say  how  many  or  what  kind  of  representation  that  com- 
mittee shall  have,  whether  one  from  each  national  or  industrial  or- 
ganization, or  to  whom  it  shall  report,  or  when.  It  seems  to  me  that 
resolution  could  be  drafted  a  little  more  plainly  so  that  it  would  be 
clearly  understood. 

A  Delegate:  Is  it  the  purpose  of  this  Congress  to  adjourn 
and  meet  again  in  the  Fall?  Or  leave  it  to  a  Committee  wuth  power 
to  act,  or  to  correspond  with  the  different  associations  ?  How  is  the 
committee  to  be  made  up,  and  how  many  ?  I  would  like  to  have  that 
a  little  more  to  the  present. 

Mr.  Ewell  (of  New  York)  :  I  am  here  presenting  the  Na- 
tional Merchant  Marine  Association,  and  I  have  a  decided  convic- 
tion on  the  subject  that  we  should  have  an  American  Merchant 
Marine.  I  believe  I  am  down  for  this  evening  to  inflict  on  this 
Congress  my  views  on  that  subject,  and  that  is  the  reason  I  have 
not  taken  the  opportunity  to  say  anything  before.  I  believe,  how- 
ever, that  the  counsel's  suggestion  was  a  direct  invitation  to  me,  as 
Secretary  of  the  National  Merchant  Marine  Association,  to  stand 
up,  and  I  say  I  am  ready  to  defend  the  idea  that  we  want  a  merchant 
marine,  and  want  it  now. 

Mr.  Jones  :  I  came  here  to  deliver  an  address,  to  promote  an 
idea  that  I  have.  I  am  glad  to  have  had  the  opportunity  of  doing 
it.    It  was  not  my  intention  or  expectation  to  take  part  in  any  debate 


NATIONAL     BUSINESS     CONGRESS  229 

or  offer  any  suggestions,  but,  as  this  gentleman  has  just  said,  it 
seems  to  me  to  have  been  invited. 

About  a  month  ago  one  of  the  leading  Senators  asked  me  if  I 
would  make  him  some  suggestions  that  might  be  of  benefit  to  him 
in  the  coming  session  of  Congress — just  opened.  T  wrote  a  memo- 
randum of  my  suggestions  as  to  wliat  might  be  helpful  legislation. 
It  was  comprised  under  six  heads,  and  only  covers  that  much  paper. 
Shortly  after  that  my  friend,  Senator  Pavey,  was  in  my  office.  I 
showed  it  to  him.  He  said:  "That  is  just  some  of  the  thoughts 
that  I  want  to  embody  in  something  I  am  going  to  do."  By  chance, 
I  happened  to  have  in  my  pocket,  among  my  several  memoranda,  a 
copy  of  that.  If  suggestions  are  wanted  as  to  concrete  ideas,  these 
may  be  all  thrown  in  the  air.  but  I  would  be  very  glad  to  ofifer  them. 
If  they  are  not  wanted,  I  will  not. 

Mr.  Frost  :     They  are  certainly  wanted. 

Mr.  Jones  :  It  may  be  a  little  radical.  My  first  idea  of  reform 
legislation  was  this : 

First :  Prohibit  corporations  owning  stock  of  other  corpora- 
tions. 

Second :  Prohibit  voting  trusts.  Establish  cumulative  stock 
voting  for  corporations,  the  same  as  exists  in  Pennsylvania  and 
Missouri. 

Third:  (a)  Prohibit  banks  from  loaning  directly  or  indi- 
rectly to  their  directors. 

(b)  Prohibit  banks  owning  stocks  in  other  banks,  such  as 
Secretary  MacVeagh  advocated  in  a  speech  two  weeks  ago  in  Chi- 
cago, but  which  I  invented,  or  at  least  introduced  in  the  New  York 
legislature  in  the  session  of  1908. 

(c)  Prohibit  banks  owning  securities  to  an  amount  in  excess 
of  10%  of  their  capital  stock,  except  when  taken  through  the  fore- 
closure of  loans. 

This  I  advocated  before  the  New  York  legislature  three  years 
ago,  because  we  had  many  banks  that  were  losing  their  functions  as 
banks  of  deposit  and  discount  and  becoming  pools.  One  had  7(i% 
of  its  assets  in  stocks  and  bonds  and  only  8%  loaned  on  paper. 

(d)  Prohibit  directors  being  directors  in  more  than  one  bank 
in  the  same  city. 

(e)  Require  banks  to  keep  their  own  reserve. 


230  NATIONAL    BUSINESS    CONGRESS 

There  are  now  seven  hundred  and  odd  milhons  in  reserve 
money  in  New  York  City  banking  through  other  banks  which 
figure  twice  as  reserve,  and  it  was  this  so-called  reserve  that  in  the 
panic  of  1907 — not  to  go  back  to  1893 — the  banks  out  here  were 
unable  to  get  what  they  wanted. 

Remove  the  statute  of  limitations  for  bank  officials'  offenses, 
which  is  now  two  years. 

I  advocated  this  before  the  New  York  legislature  in  1908.  The 
papers  all  jumped  on  me,  but  the  Comptroller  of  the  Currency,  in 
his  annual  report,  published  the  other  day,  advocated  it  himself  for 
the  reason  that  he  says  in  two  years,  under  the  present  statute  of 
limitations,  you  cannot  find  out  what  they  have  done.  They  can  do 
all  they  want  to  and  hide  it  for  two  years.  I  was  called  radical 
when  I  advocated  that  before  the  New  York  legislature  three  years 
ago,  but  I  am  glad  now  to  be  supported  by  your  worthy  Chicago 
citizen,  Mr.  MacVeagh. 

(f)  The  next  referred  to  the  plan  on  which  I  spoke  this 
morning,  to  government  bonds;  that  in  the  future  they  should  be 
allotted  to  the  smallest  subscriber  at  first  at  par,  etc. 

If  you  want  concrete  propositions,  there  are  enough  of  them, 
and  I  am  pleased  to  submit  them,  to  engage  this  Congress  for  a 
week. 

Mr.  Miles:  This  resolution  asks  the  President  to  appoint  ten 
men  to  draw  up  a  declaration  of  principles.  Do  you  want  it  to  be 
understood  that  this  declaration  will  be  the  declaration  of  those  ten 
men  and  not  of  this  convention  ?  It  may  be  their  expression  of  their 
judgment  of  what  this  Congress  should  be  for.  It  may  be  a  better 
recommendation  than  this  Congress  can  agree  upon;  all  right;  it  is 
not  the  declaration  of  this  Congress. 

The  Chairman:  That  is  not  quite  in  accordance  with  what 
was  intended.  It  was  intended  that  this  Committee  should  be  ap- 
pointed and  that  then  the  Committee  should  take  these  matters  up 
with  prominent  men  throughout  the  country  and  get  their  views  as 
to  further  action  or  resolution. 

Mr.  Miles:  Then  that  Committee  will  be  kind  of  a  clearing 
house  for  that  sentiment,  sentiment  of  the  organization? 

The  Chairman  :     Yes. 


NATIONAL     BUSINESS     CONGRESS  231 


Mr.  Miles:  Then  it  is  not  a  declaration  of  the  sentiment  of 
this  Congress  at  all. 

The  Chairman  :     In  a  way  it  is. 

Mr.  Miles:  They  should  have  a  working  Committee  to  go 
and  disclose  the  judgment  of  the  business  organizations.  May  be 
that  is  it. 

The  Chairman  :  I  think  perhaps  I  can  clear  up  the  atmos- 
phere on  this  a  little.  I  attended  the  conferences  of  the  Resolutions 
Committee,  most  of  them,  and  I  am  frank  to  say  that  the  members 
of  that  Committee  were  practically  in  accord  as  to  what  should  be 
done  on  all  of  the  matters  referred  to  in  the  program  of  the  National 
Business  Congress.  But,  Mr.  Miles,  and  gentlemen,  it  was  like  this: 
You,  John,  and  you,  Tom,  sit  down  to  discuss  the  Sherman  Act, 
and  you  discuss  it  for  an  hour,  or  you  may  discuss  it  for  two  hours, 
or  for  four  days,  and  you  reach  a  conclusion,  but  when  you  have 
reached  that  conclusion  you  have  not  formulated  in  the  proper  lan- 
guage or  in  the  language  which  you  desire  to  present  it  to  your  law- 
making bodies  just  how  they  should  enact  it.  This  Committee  on 
Resolutions  were  agreed  on  practically  everything  that  was  brought 
before  them,  but  when  it  came  to  formulating  resolutions  and  put- 
ting them  into  such  shape  as  would  be  acceptable  to  this  Congress, 
acceptable  to  the  country  at  large  or  acceptable  to  the  Congress  at 
Washington,  it  was  found  the  next  thing  to  impossible  to  do  it  in  so 
short  a  space  of  time.  That  is  the  result  of  this  resolution,  and  it 
seems  to  me  a  very  tangible  reason  as  to  why  we  should  not  rush 
into  print  with  some  resolutions  that  could  be  picked  to  pieces  by 
newspaper  men  and  by  other  people  throughout  the  country. 

]\Ir.  Irving  Washington  (of  Chicago)  :  I  think  every  one 
must  appreciate  the  difficulties  that  confront  the  Resolutions  Com- 
mittee. I,  for  one,  have  been  awaiting,  with  the  keenest  expectancy 
and  interest,  the  resolutions  that  might  be  offered  for  discussion 
here.  It  seems  to  me  that  in  view  of  the  difficulties  with  which  the 
Committee  confesses  it  is  confronted,  the  important  duty  of  formu- 
lating expressions  which  shall  reflect  the  soundest  and  best  views  of 
business  over  the  country  should  not  be  imposed  upon  any  com- 
mittee, without  at  least  giving  the  opportunity  to  the  Committee  to 
present  its  conclusions  for  approval  and  endorsement  by  this  body  at 
an  adjourned  meeting,  or  by  the  constituent  organizations  repre- 


232  NATIONAL    BUSINESS     CONGRESS 

sented  here.  It  would  certainly  add  greatly  to  the  force  of  any  de- 
clarations that  might  be  adopted  by  that  committee  to  have  them 
endorsed  after  passage  by  the  Committee. 

A  Delegate:  Mr.  Chairman,  I  was  a  member  of  the  Resolu- 
tions Committee,  but  I  am  still  in  favor  of  this  resolution  for  the 
following  reasons :  I  represent  two  large  bodies,  members  of  this 
association,  namely,  the  Illinois  Manufacturers'  Association  and  the 
United  States  Brewers'  Association.  I  have  heard  so  many  resolu- 
tions which,  in  my  opinion,  were  pretty  good,  and  I  hope  that  some- 
thing will  be  accomplished ;  but  I  surely  am  not  ready  to  vote  on 
anything  that  was  presented.  I  don't  see  how  anybody  could,  in  so 
short  a  time.  For  that  reason  it  is  more  time  that  is  necessary. 
These  subjects  should  be  worked  out.  and  if  the  Chairman  will 
appoint,  as  I  expect  he  will,  men  who  will  have  the  interest  of  this 
Congress  at  heart,  it  seems  to  me  that  we  could  not  do  better  than 
to  have  this  go  over  and  give  the  proper  time  and  opportunity  for  its 
consideration. 

I  have  heard  many  times  that  if  a  business  man  goes  into  poli- 
tics he  degrades  himself.  That  is  foolishness.  What  gives  him  that 
opinion  ?  Nothing  but  the  reputation  of  the  politician.  If  a  busi- 
ness man  goes  into  politics  his  opinions  are  looked  upon  with  favor 
by  his  neighbors  and  by  the  voters.  A  laboring  man  always  looks 
upon  the  business  man  as  a  man  of  good  judgment,  and  they  say, 
What  is  good  enough  for  the  business  man  is  good  enough  for  us. 
If  you  make  it  an  issue  that  we  should  be  recognized  in  politics,  so 
that  we  will  see  that  the  right  men  are  elected,  men  who  have  the 
interest  of  the  country,  of  the  poor  and  rich  at  heart,  we  will  do 
better;  we  will  have  more  influence.  I  hope  this  Congress  will  take 
that  into  consideration  and  base  future  actions  on  that  consideration. 
I  am  certain  if  business  men  enter  politics  we  will  get  better  politics 
at  large,  because  the  men  who  will  stand  for  something  for  nothing 
wnll  have  no  standing. 

Mr.  Miles  :  I  am  in  favor  of  this  resolution,  but  ten  men  can- 
not meet  in  a  week,  or  in  one  year,  and  express  authoritatively  our 
views,  because  we  have  not  passed  upon  an  essential  thing  in  this 
Congress.  I  am  decidedly  in  favor  of  the  resolution,  but  the  clear- 
ing house  expression — they  cannot  express  the  conviction  of  the 
Congress  because  the  Congress  has  not  expressed  itself.  If  they 
could  go  back  to  their  constituent  organizations  and  have  the  resolu- 


NATIONAL     BUSINESS     CONGRESS  233 


tion  approved  by  them,  then  it  would  become  the  judgment  of  the 
constituent  members  of  this  Congress.  I  think  that  is  good  law, 
isn't  it,  Mr.  Chairman? 

Mr.  Frost:  If  you  are  asking  me  for  an  expression  of  opin- 
ion, this  resolution  speaks  for  itself.  Any  declaration  that  does  not 
appeal  to  the  good  common  sense  of  business  men  will  have  no  force 
or  weight,  and  the  only  way  to  get  it  to  appeal  to  the  good  common 
sense  of  the  business  men  is  to  put  good,  hard  common  sense  into 
it,  and  good  common  sense  is  the  hardest  thing  to  get  quickly  and  at 
the  time  you  want  it.  So  far  as  the  question  of  whether  this  organ- 
ization is  called  together  to  ratify  and  approve,  that  means  to  meet 
again,  as  it  carries  its  own  methods  with  it. 

My  good  brother  says  that  he  is  ready  to  defend  the  merchant 
marine.  Sure,  we  all  are.  He  did  not  tell  us  how  to  get  it.  We 
want  a  merchant  marine.  Why,  w^e  ought  to  have  it.  Congressmen 
will  agree  with  you,  but  how  can  we  get  it?  Here  are  some  specific 
recommendations,  many  of  them.  Some  with  reference  to  banking. 
How  can  we  weave  all  that  together  so  we  can  have  the  banker  with 
us?  We  have  the  manufacturer  with  us,  we  have  the  brewer  with 
us,  and  all  that,  and  they  say :  "Yes ;  we  are  all  together  on  that." 
It  is  not  the  judgment  of  ten  men.  A  great  speech  is  the  production 
of  the  man  who  delivers  it.  What  is  it  that  makes  great  speeches? 
Words  to  picture.  It  is  the  ability  to  just  weave  the  facts  together 
that  all  people  believe.  (Applause.)  It  is  hard  to  do  that.  It  is 
certainly  foolish  to  try  to  do  it  until  you  have  gotten  the  intelligence. 

Now,  I  would  like  to  hear  anybody  here  who  has  a  fixed  con- 
viction on  anything.  We  all  will  demand  a  merchant  marine,  but  I 
suppose  tonight  w^e  will  be  told  how  to  get  it.  Not  in  a  spirit  of 
criticism  do  I  say  this,  but  suppose  I  had  the  power  to  get  it  and  I 
should  say :  Why  shouldn't  I  get  it,  but  how  will  I  get  it?  We  are 
convinced  we  ought  to  have  it. 

In  this  resolution  there  is  not  any  "nigger  in  the  woodpile."  It 
is  up  to  the  good  sense  of  this  body  to  decide  upon  what  they  want. 
What  the  Committee  was  agreed  upon  was  that  the  time  was  ripe 
to  state  what  we  want  and  exactly  what  we  want,  and  why  we 
want  it.  We  also  felt  that  nobody  could  state  it  as  well  as  we  could ; 
I  do  not  mean  this  Committee,  but  I  mean  these  men  here  assem- 
bled, and  since  we  could  not  state  it  we  had  no  right  to  ask  anybody 
to  give  us  something  that  we  don't  know  how  to  ask  for.    We  want 


234  NATIONAL     BUSINESS     CONGRESS 

to  get  all  the  angles  of  the  situation.  The  brewer  has  his  troubles ; 
his  agitation  is  the  cost  of  material,  his  license ;  he  has  one  thousand 
and  one  exactions.  He  knows  his  business ;  we  cannot  tell  him  how 
to  run  it,  but  we  know  we  can  tell  him  one  thing,  and  that  is  the  cost 
of  production  is  increasing,  his  market  is  decreasing  and  his  facili- 
ties for  producing  are  greater  than  they  were  before.  He  has  been 
blind,  deaf  and  dumb,  unless  he  knows  that  himself  without  our 
telling  him.  Perhaps  you  cannot  cut  ofif  the  cost  of  productions ; 
perhaps  that  is  fixed ;  maybe  those  are  produced  now  as  cheaply  in 
bulk  as  they  ever  will  be.  The  cost  experts  will  tell  us  about  that. 
How  can  we  get  that  in  just  such  shape  that  when  we  lay  it  down 
before  a  business  man  he  will  say,  "Yes,  I  will  subscribe  to  that," 
and  then  he  subscribes  to  it  to  help  push  it  along.  You  cannot  run 
it  without  money,  and  you  cannot  get  money  out  of  people  unless 
you  can  show  it  is  well  worth  while. 

The  Resolutions  Committee  had  no  private  opinion ;  it  only 
offered  this  as  something  to  crystallize  the  matter  because  it  is  time. 

In  1838  it  would  have  been  folly  for  an  equal  number  of  Aboli- 
tionists to  have  gathered  together  and  said  that  the  time  was  ripe 
for  a  declaration  against  human  slavery.  That  would  have  been 
absolutely  nonsense.  Eighty  per  cent  of  the  people  believed  in  it, 
but  when  the  Republican  party  was  born  it  was  a  very  good  time  for 
the  people  to  get  together  and  make  a  declaration.  Why  ?  To  voice 
the  sentiment  of  the  people.  Men  like  to  go  out  and  hammer  their 
own  way.  They  would  rather  outsell  a  competitor.  You  are  only 
advancing  in  business  when  you  admit  that  there  is  competition.  It 
is  only  the  other  fellow  beginning  to  take  your  orders ;  his  ma- 
chinery is  a  little  better,  and  he  is  more  aggressive ;  then  you  begin 
to  recognize  competition,  and  then  you  begin  to  get  together.  Now, 
you  have  been  hammered  together ;  the  fact  that  we  are  here  shows 
that,  and  the  lawyer  is  hammered  together  with  you.  The  day  when 
the  lawyer  can  make  any  money  is  not  only  a  matter  of  public  inter- 
est on  their  part,  but  it  is  an  intelligent  self-interest.  The  days 
when  men  can  go  ahead  by  breaking  down  are  gone.  If  you  cannot 
build  up,  you  belong  to  the  dark  ages.  That  we  are  all  agreed  upon ; 
you  cannot  get  away  from  it.  Hold-up  men  may  get  money  from  a 
man  by  beating  him  up  once  or  twice,  but  the  days  of  getting  ahead 
by  holding-up  policies  have  gone.  In  putting  this  together  we  do 
not  want  the  banker,  or  the  manufacturer,  or  the  steel  men,  or  the 
railroad  men  to  think  they  are  getting  the  worst  of  it.     The  only 


NATIONAL    BUSINESS     CONGRESS  235 

way  they  will  feel  they  are  getting  the  better  of  it  will  be  when  they 
know  about  it. 

I  haven't  any  idea  who  the  Chair  will  appoint  on  the  Committee, 
but  from  what  I  know  of  the  Chair  I  know  the  Committee,  when 
appointed,  will  not  reflect  the  interest  of  any  single  man  or  class  of 
men,  and  no  one  would  want  that.  Every  line  of  interest  must  be 
taken  into  consideration,  just  as  Mr.  Reynolds  told  us  the  other 
day.  The  bankers  cannot  do  it,  and  the  merchants  alone  cannot  do 
it,  but  you  can  all  get  together.  By  all  getting  together,  and  working 
together,  you  can  formulate  a  declaration  of  principles,  so  that  when 
people  see  it  they  will  instinctively  say  that  it  is  good.  It  is  just 
like  the  eye  of  a  needle.  People  have  been  sewing  for  1,300  years, 
but  only  since  the  needle  was  invented.  After  the  needle  was  in- 
vented why  didn't  they  think  of  it  before;  it  was  so  simple.  That 
made  sewing  possible,  but  I  do  not  believe  there  is  anyone  here 
quite  so  wise  as  to  formulate  a  policy  quite  so  simple,  but  I  do 
think  you  can  formulate  one  that  we  can  all  see  is  a  correct  one 
when  we  hear  it.  It  is  possible  to  do  it,  but  you  cannot  do  it  in  a 
minute. 

I  feel  pretty  strongly  upon  these  glittering  generalities  in  the 
way  of  resolutions.  You  read  them  and  when  you  get  through  you 
don't  know  what  they  mean.  Maybe  business  is  not  quite  ready, 
that  it  has  not  been  hammered  enough.  It  has  been  hammered  at 
both  ends  and  the  middle  to  the  point  where  it  says  it  is  ready.  If 
not,  next  year  it  will  have  been  hammered  a  little  more,  and  the 
next  year  still  a  little  more,  because  the  persons  hammering  are 
having  a  pretty  good  time  doing  it.  If  it  is  the  Sherman  law,  let  us 
find  out  about  it.  If  it  is  because  one  bank  holds  stock  in  another, 
let  us  find  out  about  that.  If  it  is  because  a  combination  is  right,  let 
us  find  out  about  that. 

I  have  done  altogether  more  talking  than  I  had  expected  to. 
A  helpful  talk  would  be  where  a  member  feels  that  he  has  reached 
a  certain  conclusion  on  a  certain  matter.  I  do  not  expect  a  man  to 
jump  up  and  say  he  thinks  he  can  do  this,  that  or  the  other  thing. 
We  will  agree  on  things  that  we  think  we  ought  to  have.  Now,  we 
want  to  know  how  to  get  them,  and  how  to  get  them  is  something 
that  any  man  who  is  trying  to  help  has  a  perfect  right  to  know,  and, 
unfortunately,  it  is  not  like  going  to  the  doctor  or  going  to  the 
lawyer.  There  is  nobody  whom  you  can  go  to  who  can  tell  you 
what  will  help  you  but  yourself,  and  the  reason  is  there  are  no  busi- 


236  NATIONAL     BUSINESS     CONGRESS 

ness  experts  save  those  who  are  in  business.  A  business  man's 
opinion  is  tested  right  on  the  spot,  and  the  bank  balance  spells 
whether  he  knows  his  business  or  not.  With  a  lawyer  or  a  doctor 
that  may  not  be  true.  A  man  may  go  to  a  doctor  and  he  will  pre- 
scribe medicine  for  him,  but  it  may  be  that  the  man  would  have 
gotten  well  just  as  quickly  without  having  any  medicine  at  all.  The 
same  is  true  with  a  lawyer;  a  client  goes  to  a  lawyer  and  asks  his 
advice,  and  accepts  it  and  acts  upon  it  and  is  satisfied,  although  the 
advice  may  have  been  wrong  as  a  legal  proposition,  because  it  was 
not  really  tested  out.  Your  opinions  were  tested  at  once.  You  have 
to  solve  this  problem  for  yourselves. 

Mr.  Pavev  :  I  suggest  that  we  can  reconcile  what  seems  to 
be  a  difference  of  opinion.  I  think  the  question  arose  over  the 
question  whether  this  Committee,  if  appointed,  would  have  power 
to  bind  any  organization.  I  take  it  that  if  this  Congress  were  to 
pass  a  resolution  of  some  specific  character,  the  probabilities  are  that 
no  delegate  has  power  to  bind  his  organization  on  any  one  proposi- 
tion, and  if  the  organization  that  he  represents  did  not  agree  with 
his  individual  opinion  to  which  he  gave  his  consent  here,  then  he 
may  not  conform  to  them.  The  Chairman  of  the  Committee  has 
used  an  illustration  that  I  think  will  be  of  value  if  further  extended. 
He  referred  to  the  adoption  of  the  Declaration  of  Independence. 
The  colonies  sent  delegates  to  a  Constitutional  Convention  to  pre- 
pare a  Constitution.  When  they  had  done  it  it  did  not  bind  any 
state  whatsoever.  It  had  to  be  ratified  by  all  the  states,  and  all 
they  could  provide  was  that  if  nine  actually  ratified  it,  it  would  take 
effect ;  and  it  did  take  effect  as  soon  as  it  was  ratified  by  nine. 

It  seems  to  me,  laying  aside  this  question  of  Committee,  that 
if  you  now  agreed  on  some  resolution  and  every  man  voted  for  it, 
it  would  not  bind  the  organizations  which  did  not  like  it.  When 
this  Committee  shall  have  been  appointed  and  adopted  a  platform 
or  constitution,  or  Bill  of  Rights,  whatever  you  choose  to  call  it,  it 
will  not  bind  any  man  here  unless  it  meets  his  approval.  But  it 
might  become  a  verj^  useful  document  in  securing  the  adhesion  of 
these  organizations  to  a  plan  of  action.  Let  the  Chairman  appoint 
the  Committee  and  discharge  this  Committee,  and  then  if  the  Con- 
gress washes  to  take  up  some  one  of  my  friend  Jones'  propositions 
and  vote  upon  it,  it  will  not  be  in  conflict  with  the  work  of  that 
Committee  to  do  it. 


NATIONAL     BUSINESS     CONGRESS  237 

The  Chairman  :  IMay  I  further  inflict  upon  you  my  observa- 
tions? Those  are  that  90%  of  all  the  resolutions  that  have  been 
passed  during  the  past  number  of  years  by  commercial  bodies  have 
been  directed  into  the  air.  The  proposition  that  we  have  now  before 
us  is  to  have  the  Committee  appointed  who  will  thresh  out  these 
questions,  bring  them  before  the  proper  organizations,  such  organ- 
izations as  will  be  members  of  the  general  organization,  if  you 
please,  and  when  they  finally  formulate  resolutions,  those  resolu- 
tions will  be  directed  to  your  hired  men  in  Washington,  and  until 
you  get  at  those  men,  until  you  get  at  them  right,  say,  with  hammer 
and  tongs,  to  use  the  familiar  expression,  you  will  not  accomplish 
anything,  and  you  never  have  accomplished  anything  until  you  did 
it  in  that  way.  This  Committee  will  take  good  care  to  see  that  the 
resolutions  are  directed  direct  to  our  law  makers.  That  is  the  ob- 
ject, really,  concretely,  I  think,  of  this  operation. 

A  Delegate:  I  have  been  giving  this  matter  considerable 
thought  for  some  years,  and  the  gentleman  remarked  that  the  ques- 
tion of  increase  in  cost,  with  a  lessening  market,  was  one  of  the 
factors  that  brought  these  people  together.  When  you  appoint  a 
committee,  if  you  care  to  receive  some  of  the  material  that  I  have 
dug  up  in  the  last  four  or  five  years,  that  will  convey  to  your  mind 
the  cause  of  the  increasing  cost,  I  will  be  very  glad  to  submit  it.  I 
have  never  presented  it.  The  economic  conditions  of  to-day  were 
apparent  some  years  ago.  I  can  say  positively  three  years  ago.  You 
could  have  figured  out  in  figures  what  your  economic  conditions 
are  to-day.  It  is  not  any  guess  work.  It  has  been  demonstrated 
thoroughly,  and  I  have  got  them  and  I  can  give  them  to  the  Com- 
mittee and  they  can,  perhaps,  get  some  definite  idea  upon  resolu- 
tions. 

Mr.  Wallis:  Mr.  President,  when  I  came  into  this  meeting 
as  a  representative  of  the  National  Implement  and  Vehicle  Associa- 
tion, in  our  discussions  in  reference  to  this  meeting,  we  were  fearful 
that  the  government  would  be  shot  too  quick.  We  were  rather  of 
the  opinion  that  we  would,  perhaps,  have  to  use  some  talk  upon  the 
floor,  and  perhaps  some  influence  with  the  Resolutions  Committee 
to  prevent  too  much  action,  too  quick  action.  The  Resolutions 
Committee  outdid  us  all  on  that  end  of  it,  and  I  think  wisely.  I 
am  more  of  that  opinion  after  listening  to  the  remarks  that  have 
been  made  on  the  floor  since  the  resolution  was  introduced. 


238  NATIONAL    BUSINESS     CONGRESS 

It  seems  to  me  that  what  we  ought  to  aim  at  as  business  men 
in  this  conference  is  along  the  hne  of  a  constructive  platform  which 
will  unite  the  business  interests.  If  you  attempt  to  promulgate  that 
here  within  the  short  length  of  time  the  Resolutions  Committee  had 
to  consider  it  you  would  pass  something  out  as  a  business  men's 
platform  which  you  would  find  would  be  almost  immediately  at- 
tacked and  you  would  have  no  platform  and  it  would  be  torn  into 
shreds.  I  had  some  weeks  ago  attended  a  conference  in  New  York 
City  and  in  an  association  where  the  question  was  up  for  discussion 
of  the  introduction  of  a  simple  resolution  on  that  question — one 
situation.  That  matter  was  threshed  out,  I  am  told,  for  about 
three  days.  I  heard  one  evening  two  hours'  discussion  of  it,  and  I 
heard  the  next  morning  two  hours'  more  discussion  of  it,  before  six 
men  could  agree  upon  presenting  that  simple  resolution — one  asso- 
ciation upon  the  business  situation. 

Now,  gentlemen,  you  are  dealing  here  to-day — this  is  a  Na- 
tional Congress ;  you  have  the  East  and  the  West  and  the  South 
and  the  North  to  take  into  consideration,  and  all  of  its  ramifications, 
and  they  are  intricate  and  many,  and  I  think  the  Resolutions  Com- 
mittee are  acting  wisely  in  deferring  action  in  the  formulation  of  a 
platform  for  the  business  interests  of  this  country  to  unite  upon. 
A  platform,  if  you  please,  along  the  lines  that  I  recommended  in 
the  address  that  I  delivered  before  this  meeting,  that  v.'ould  be 
broad  enough  in  scope  to  unite  the  business  interests  on  a  platform 
that  could  be  presented  to  both  political  parties  as  a  plank  for  their 
platform.  You  cannot  do  that  hastily;  you  need  time  to  get  the 
concrete  sentiment  of  the  East,  the  West,  the  North  and  the  South, 
and  then  you  may  not  be  able  to  accomplish  it. 

There  is  just  one  point  I  would  like  to  touch  upon,  and  I  don't 
know  that  I  understand  the  resolution  thoroughly.  This  appoint- 
ment of  the  Committee  to  have  power  to  act.  It  is  a  little  indefinite 
in  my  mind  as  to  just  how  they  are  to  act  and  for  whom  they  are 
to  act.  My  own  idea  of  it  is  that  you  are  seeking  practically,  indeed, 
it  seems  that  you  are  asking  for  more  time  for  this  Resolutions 
Committee  and  simply  extending  more  time  to  report  to  this  Com- 
mittee; is  that  it? 

Mr.  Frost:  That  interpretation  might  be  put  upon  it.  I 
don't  know  that  the  Committee  has  any  very  definite  idea  beyond 
the  fact  that  it  was  time  to  formulate,  and  when  formulated  we 
should  get  the  business  sentiment  back  of  it  that  we  wanted.     ^ 


NATIONAL     BUSINESS     CONGRESS 239 

think  the  ordinary  form  of  procedure  would  be  that  the  platform 
if  formulated  would  be  discussed  by  every  business  organization  in 
every  form  and  nature,  and  see  whether  it  did  reflect.  It  was  very 
vague  and  indefinite,  but  it  was  because  the  Committee  could  not 
do  it  any  more  definitely. 

Mr.  Wallis:  I  think  the  resolution  should  be  amended  so 
that  that  Committee,  when  appointed,  will  report  to  a  subsequent 
call  of  this  Association  or  this  Business  Congress. 

The  Chairman  :  I  think  we  have  got  to  the  point  now  where 
it  would,  perhaps,  be  as  well  for  you  to  explain  to  this  Congress 
what  has  been  talked  about  with  reference  to  absorptions,  you  might 
say,  of  this  Congress,  by  the  National  Business  League  of  America. 

Mr.  Wallis  :  I  will  be  very  glad  to  do  that.  I  will  go  back 
a  little,  with  your  permission,  Mr.  President. 

The  Chairman  :     Yes;  I  would  be  very  glad  to  have  it. 

Mr.  Wallis:  So  that  this  Congress  may  have  the  judgment 
of  the  National  Implement  and  Vehicle  Association,  in  their  meet- 
ing held  last  October,  they  felt  that  the  time  had  arrived  when  the 
business  interests  of  this  country  should  get  together  and  act  con- 
currently. They  appointed  a  Committee  on  Political  Action,  with 
the  object  in  view,  as  specifically  stated,  of  interesting  other  organ- 
izations in  this  country,  and  to  appoint  similar  committees  and  call 
a  joint  meeting  of  all  those  committees  for  the  consideration  of  this 
question.  About  the  time  that  Committee  was  appointed  the  officers 
of  the  National  Business  League  of  America  issued  their  call  for  a 
National  Business  Congress.  Our  Committee  met  and  we  de- 
cided that  this  was  directly  in  line  with  the  work  which  we  were 
seeking  to  bring  about,  and  so  we  got  in  conference  with  the  officers 
of  this  Association.  Since  coming  to  this  city  the  question  of  en- 
larging the  scope  of  the  National  Business  League  of  America,  so 
as  to  take  in  various  organizations  in  what  might  be  termed  a  clear- 
ing house — in  other  words,  make  this  National  Business  League  of 
America,  which  has  the  name,  and  which  stands  for  the  things 
which  you  want  as  business  men,  make  this,  instead  of  any  specific 
local  issue  which  you  are  seeking  to  bring  out,  make  it  national  in 
its  scope;  make  it  a  clearing  house  through  which  your  political 
affairs  may  be  cleared. 


240  NATIONAL     BUSINESS     CONGRESS 

Now,  the  gentlemen  here  all  represent  various  interests.  I 
stand  here  representing  the  National  Implement  and  Vehicle  Asso- 
ciation. A  gentleman  here  represents  the  banking  interests  of  Wall 
Street;  another  gentleman  represents  the  merchant  marine,  and 
various  interests  are  represented  in  this  meeting.  You  cannot  bring 
into  an  association  of  this  kind  the  absolute  specific  details  of  those 
various  and  varied  interests.  You  have  got  to  come  up  through 
a  clearing  house  with  some  concrete  idea  as  to  what  you  are  going 
to  legislate  on  universally.  In  a  broad  sense  it  affects  those  various 
interests,  but  there  are  various  ramifications  and  each  one  should 
thresh  that  out  in  their  respective  associations.  We  are  affected  in 
the  National  Implement  and  Vehicle  Association  specifically ;  it  has 
affected  other  interests  similarly  to  ours.  If  that  is  true,  take  it  up 
through  this  clearing  organization  and  let  this  organization  be  a 
clearing  house  by  delegates  from  your  various  organizations 
throughout  the  country,  and  let  them  appoint  delegates  to  come  here 
and  let  this  organization  be  crystallized  into  something  that  will 
act  nationally,  and  through  your  Congressmen  in  Washington. 

That,  gentlemen,  it  seems  to  me,  is  along  constructive  lines. 
If  we  can  get  that  going,  and  then  get  your  platform  wisely  and 
carefully  considered,  and  put  it  up  to  this  organization  to  work  out 
the  details  as  you  go  along,  as  to  what  specific  questions  you  want 
taken  up,  and  how  you  want  them  taken  up,  we  would  have  an 
organization  right  from  the  ground  up.  You  can  organize  in  any 
State  and  you  have  a  clearing  house  association  that  will  affiliate 
with  this,  and  then  things  local  in  the  State  will  be  handled  there. 

I  hope  you  will  change  that  resolution  so  that  it  will  be  to 
report  back  to  a  continuation  of  this  meeting.  Let  us  not  lose 
the  effect  of  what  we  have  gained  here,  as  you  have  started  here 
by  these  papers  and  this  discussion;  it  is  of  value  and  should  be 
continued. 

In  regard  to  this  clearing  house,  it  was  discussed  by  eight  men 
or  more  yesterday,  and  they  were  all  in  accord  that  that  was  the 
idea  that  should  be  brought  about  at  the  adjournment  of  this  meet- 
ing. 

A  Delegate:  These  resolutions  should  present  the  sentiment 
of  this  Congress  and  not  of  the  trade  associations  back  of  the  dele- 
gates. 

The  Chairman  :    That  is  true. 


NATIONAL     BUSINESS     CONGRESS  241 

A  Delegate  :  I  think,  perhaps,  there  has  been  some  misunder- 
standing by  Mr.  IMiles  and  others  that  we  represent  those  associa- 
tions in  that  sense,  and  that  the  resolutions  would.  I  do  not  under- 
stand it  so.  I  understand  the  resolutions  simply  represent  the  ideas 
of  this  particular  meeting.  As  the  gentleman  just  said,  I  really  feel 
that  this  meeting  should  not  go  off  in  thin  air.  We  ought  to  ac- 
complish something.  I  do  not  want  to  offer  this  as  a  suggestion, 
but  this  resolution  should  in  some  way  come  back  to  the  National 
Business  Congress,  and  that  could  be  approved. 

Mk.  Gates:  The  one  thing  that  has  impressed  me  more 
strongly  in  the  proceedings  of  this  Congress  than  anything  else  has 
been  the  unanimity  of  opinion  among  all  these  different  men  on 
different  subjects  and  the  dift'erent  associations  generally.  There 
does  not  seem  to  be  any  difference  of  opinion,  in  my  judgment,  that 
could  not  be  easily  reconciled  by  such  a  committee  as  provided  for 
in  this  resolution,  and  I  believe  that  if  such  a  committee  were  ap- 
pointed thev  would  formulate  a  declaration  of  principles  which 
could  be  sent  to  all  these  associations  and  which  would  be  adopted 
by  them.  From  the  practical  standpoint  I  want  to  give  a  little  illus- 
tration of  that,  because  I  believe  it  would  work  out  in  the  same 
way. 

In  1898  the  foundrymen  and  the  manufacturers  of  this  country 
found  themselves  sorely  oppressed  by  the  moulders'  union,  and  an 
association  called  the  National  Founders'  Association  was  formed. 
At  first  it  was  an  association  that  did  everything  it  could  to  make 
agreements  and  to  work  in  conferences  with  the  moulders'  union. 
As  time  went  on  we  found  a  great  deal  of  difficulty  in  doing  that, 
because  we  found  a  great  deal  of  difficulty  amongst  the  members. 
We  ourselves  didn't  know  exactly  the  ground  that  we  stood  on. 
Here  was  a  great  foundry  employing  a  thousand  men  that  had 
some  sort  of  an  idea,  and  a  small  foundry  that  had  different  condi- 
tions, wdiich  had  some  other  question  and  some  other  kind  of  an 
idea,  so  it  was  finally  impressed  upon  us  that  we  must  find  some 
common  platform  on  which  we  could  stand.  A  committee,  the  same 
as  is  suggested  here,  was  appointed.  That  committee  formulated  a 
declaration  of  principles.  When  they  were  ready  to  report  a  con- 
vention was  called  and  the  declaration  of  principles  was  submitted 
to  that  convention.  The  convention  ratified  it;  they  were  pleased 
with  those  declarations  and  it  was  passed  unanimously.  Then,  un- 
der the  constitution,  this  declaration  of  principles  was  sent  to  each 


242  NATIONAL     BUSINESS     CONGRESS 

member  of  the  Association,  with  the  result  that  the  declaration  of 
principles  was  adopted  unanimously  by  that  Association.  That  was 
in  1903,  and  that  declaration  of  principles  has  stood  until  this  day, 
and  is  still  standing  and  has  never  been  amended.  It  fitted  the  case 
and  has  been  the  standard  and  the  rule  of  the  Association  from 
tliat  time  on.  Now,  I  believe  that  that  is  exactly  what  is  wanted 
here.  I  think  this  Committee  should  formulate  this  declaration  of 
])rinciples.  It  should  then  be  submitted  to  a  convention,  if  you 
please,  and  ratified  by  that  convention  and  then  submitted  to  the 
individual  members  of  all  these  subscribing  associations.  I  don't 
know  of  any  way  in  which  you  can  so  quickly  and  thoroughly  get 
before  all  those  who  are  interested  in  it  and  get  exactly  the  informa- 
tion that  the  Committee  wants. 

Mr.  Sechler:  It  has  been  pretty  well  advertised  that  here 
are  representative  organizations  of  the  United  States,  and  we  are 
going  to  establish  a  declaration  of  principles  that  we  stand  for.  It 
has  been  pretty  well  advertised  in  the  papers,  and  now  what  is  the 
cry?  That  we  had  not  sand  enough,  or  we  did  not  know  enough 
about  what  we  wanted,  so  we  referred  it  to  a  new  committee  to 
report  to  somebody  else  in  the  sweet  bye  and  bye.  Mr.  President, 
I  think  whatever  the  opinions  or  differences  of  opinions  have  been 
in  the  Resolutions  Committee,  it  was  their  place  to  report  to  us  the 
resolutions  before  them,  either  with  or  without  recommendations, 
and  let  us  pass  our  opinion  on  them.  We  have  an  opportunity  now 
that  we  will  not  have  repeated.  We  cannot  get  so  many  bodies  to- 
gether again  as  this  in  the  next  year,  and  if  this  new  committee  is 
to  be  appointed,  they  can  make  recommendations  and  send  them 
to  the  various  parties,  the  different  bodies  in  this  organization,  but 
w^e  will  have  no  meetings  for  months  to  come.  I  believe  the  manu- 
facturers' meeting  in  May  next  is  the  first  one.  The  National  Im- 
plement and  Vehicle  Association  meets  next  October.  What  im- 
pression is  our  action  here  going  to  make  on  Congress?  It  comes 
out  as  a  confession  that  we  don't  know  what  we  want.  I  make  an 
amendment.  Air.  President,  to  the  motion  to  appoint  that  Committee 
that  the  matters  under  consideration  at  this  Congress  be  referred  to 
the  National  Business  League  of  America  for  its  action. 

Mr.  Bannister:  I  would  like  to  say  just  a  word  in  report- 
ing the  resolution,  and  in  doing  so,  to  explain  it.  In  addition  to 
being  a  manufacturer,  I  have  sometimes  had  the  pleasure,  and  some- 


NATIONAL     BUSINESS     C  O  N  G  R  E  S  S  243 

times  the  displeasure,  of  being  an  officer  in  tlie  organization  of 
manufacturers  for  the  last  seven  and  a  half  years.  For  seven  and 
a  half  years  we  have  tried  to  find  out  what  we  could  do,  and  do 
rightfully  and  legally.  I  do  not  think  that  any  manufacturer  of 
any  prominence  who  has  had  his  ear  to  the  ground  is  at  all  surprised 
at  the  conditions  as  they  exist  to-day,  if  he  were  thinking  about  it 
three  years  ago.  I  think  almost  any  one  could  have  pictured  about 
this  condition,  particularly  within  the  last  three  years.  We  have 
taken  counsel  upon  counsel,  and  we  find  one  counsel  tells  us  to  do 
something,  and,  before  we  can  get  into  action  upon  it,  there  is  some 
court  decision  that  will  show  us  that  if  we  did  it  we  would  probably 
all  go  to  jail.  So,  it  would  seem  to  me,  that  this  was  a  very  wise 
movement,  and  I  disagree  with  my  friend,  Mr.  Sechler — whom  I 
know  very  w^ell  and  who  has  just  spoken  here — that  it  would  be 
impossible  to  get  an  organization  of  this  kind  together  very  soon.  I 
venture  to  say  that  within  three  months  from  now,  or  within  one 
month  from  now,  if  a  call  were  sent  out  you  would  have  a  better 
representation  of  the  manufacturers  and  business  interests  of  this 
country  than  you  have  here  to-day.  I  sincerely  believe  this,  because 
I  have  been  one  of  the  kind  that  has  been  hammered  here  and  ham- 
mered there  until  we  w^ould  like  to  know  exactly  what  shape  to  as- 
sume. We  have  had  little  hats  and  big  hats,  and  in  the  latest  style. 
The  ladies  don't  know  just  where  they  are,  and  we  don't  know  just 
where  we  are.  Now,  if  we  can  have  a  wise  committee — as  I  have 
no  doubt  the  Chairman  will  appoint — which  will  study  over  this 
proposition  for  us  and  then  put  it  up  to  us  and  say,  Now  w^e  can 
work  upon  this  line  or  that,  we  would  be  ready  to  work  with  all 
energy  there  is  in  us — and  my  experience  has  been  that  there  is  a 
good  deal  of  energy  in  us  when  we  once  get  started  the  right  way. 

AIr.  Doud  (of  Buffalo)  :  Mr.  Chairman.  I  think  it  would  be 
wise  if  this  Congress  adjourned  without  formulating  a  solid,  firm 
plan.  It  would  be  iniquity  if  they  followed  the  example  of  some 
form  of  our  legislators  and  enacted  a  dream  into  a  law  the  next  day. 
I  believe  the  Resolutions  Committee  acted  very  wisely  in  not  at- 
tempting a  world-wide  problem  in  a  few  hours.  To  me  the  plan 
seems  best  to  appoint  this  committee,  in  the  discretion  of  the  Chair- 
man, and  let  them  formulate  the  resolutions,  send  them  to  each 
organization  composing  this  Association  and  ask  their  directions  to 
act  upon  them,  and  then  ask  them  to  submit  the  resolutions  to  their 
members.    When  that  information  comes  back — it  is  not  a  small  job. 


244  NATIONAL     BUSINESS     CONGRESS 

I  realize — when  that  information  comes  back  this  committee  can 
then  propose  a  foundation  that  will  mean  something,  that  will  stand 
for  something,  and  if  it  is  criticised  point  back  to  the  fact  that  this 
represents  so  many  organizations,  representing  so  many  people. 

I  was  sent  to  this  Congress  uninstructed  by  the  Chamber  of 
Commerce  of  Buffalo.  They  evidently  had  confidence  in  my  judg- 
ment. I  would  not  feel  like  passing  upon  some  resolution  that 
would  practically  represent  the  opinion  of  our  three  thousand  mem- 
bers, or  the  hundred  thousand  members  of  this  organization ;  and 
yet  I  believe  the  time  has  passed  for  business  men  to  stay  at  home 
and  w^hisper  down  the  well  or  holler  up  a  chimney.  I  believe,  to 
use  the  words  of  our  townsman.  President  Cleveland,  a  condition 
and  not  a  theory  stands  before  us  today,  and  that  the  sooner  busi- 
ness men  get  together  and  show  those  who  are  acting  unfriendly  to 
the  interests  generally,  that  they  have  ideas  they  can  unite  upon, 
and  they  propose  to  do  so,  the  sooner  the  business  man  will  become 
a  factor  and  not — I  was  almost  going  to  say,  the  laughing-stock 
of  some  of  the  politicians.  That  is  the  way  I  look  at  this  matter  at 
this  time. 

Mr.  Bannister:  I  believe  what  the  gentleman  from  Buffalo 
has  stated  is  along  the  same  line.  The  National  Economic  Society 
I  believe,  has  done  the  same  thing;  bankers  and  others,  and  asked 
them  to  indicate  the  order  of  their  preference  on  those  questions, 
which  ultimately  simmered  down  to  eleven.  I  think  some  similar 
result  can  be  obtained  by  this  organization  in  the  same  way. 

Mr.  Dold:  As  far  as  the  Chamber  of  Commerce  of  Buffalo 
is  concerned,  I  agree  that  if  the  meeting  were  called  in  a  month  or 
two,  I  believe  with  the  gentleman  over  there,  that  with  a  proper  call 
and  energy,  with  push  to  it,  it  would  bring  one  or  more  representa- 
tives from  every  association,  which  would  make  us  five  hundred 
representatives  here  instead  of  one  hundred. 

Mr.  Boothe  (of  California):  Mr.  Chairman;  we  are  en- 
deavoring to  justify  the  report  of  the  Resolutions  Committee,  which 
hardly  seems  necessary,  perhaps,  after  what  the  chairman  has  said. 
The  Resolutions  Committee  was  appointed  by  the  President  of  this 
organization,  and  when  we  convened  we  looked  around  at  each 
other  and  we  felt  we  had  a  wise  President.  He  has  justified  his 
position  by  the  character  of  the  men  he  has  appointed  on  his  com- 
mittee. 


NATIONAL     BUSINESS     CONGRESS  245 

We  took  the  matter  up  with  the  greatest  zeal  and  hopefulness, 
and.  after  a  great  deal  of  discussion,  it  was  resolved  that  each  one 
should  suhniit  some  form  of  resolution  that  would  embody  what  he 
wanted,  and.  after  more  or  less  personal  consultation,  it  was  dis- 
covered that  the  time  was  too  short  to  thoroughly  consider  such  a 
matter.  It  grew  as  we  considered  it.  I  did  not  recognize  or  con- 
sider the  fact  that  it  would  be  easy  to  oflfer  a  resolution  here  which 
would  add  to  the  perplexities  of  the  business  men  of  this  covmtry. 
It  is  not  so  easy  to  offer  resolutions  which  would  get  them  out  of 
their  perplexities.  As  a  result,  this  resolution  was  formulated  and 
unanimously  passed.  There  was  no  disagreement  between  the 
members  of  the  Resolutions  Committee,  but  we  felt  that  if  four 
men,  or  five  men,  could  think  of  so  many  things  they  could  do  but 
had  not  the  time  to  do — I  want  you  to  understand  there  was  no  lack 
of  ability  to  formulate  resolutions  in  the  least,  we  all  felt  we  could 
do  it.  but  we  felt  if  it  were  left  to  the  President,  he  could  appoint  a 
larger  committee  of  ten  and  give  them  more  time  and  not  encumber 
them  with  any  instructions,  that  they  could  bring  together  something 
that  the  business  men  of  the  country,  a  large  number  of  them,  a  large 
majority  of  them,  would  find  would  meet  their  requirements.  The 
reason  that  in  that  resolution  many  of  the  things  that  have  been  pro- 
posed by  these  gentlemen  here  w'ere  not  included  was,  we  thought, 
and  we  think  still,  that  a  committee  of  ten  w'ould  have  other  ideas, 
and  for  that  reason  the  matter  was  left  to  the  committee  to  take  up, 
feeling  that  with  the  time  to  consider  they  would  arrange  for  con- 
sultation with  different  organizations  and  would  formulate  a  better 
way  whereby  this  splendid  organization  could  be  conducted  in  some 
form.  I  would  like  to  add  to  the  resolution,  if  it  is  permissible,  that 
the  President  of  this  organization  shall  be  a  member  of  that  Com- 
mittee of  ten  which  he  will  name. 

The  Chairman  :  Two  amendments  have  been  offered  to  this 
resolution.     Is  there  any  second? 

(The  amendment  was  duly  seconded.) 

Mr.  Doi.d:     May  we  have  the  resolution  read  once  more? 

Mr.  Frost:  "Resolved,  That  the  President  of  this  National 
Congress  be,  and  he  hereby  is,  authorized  and  directed  to  promptly 
appoint  a  suitable  committee  to  formulate  a  declaration  of  princi- 
ples and  purposes  which  will  reflect  the  necessities  and  demands  of 


246  NATIONAL     BUSINESS     CONGRESS 

the  commercial,  industrial  and  business  interests  of  our  country; 
and  that  your  Committee  on  Resolutions  be  discharged." 

Mr.  Bannister:  I  would  like  to  move  to  amend  that  by 
having  the  President  of  this  Congress  made  a  member  of  that  com- 
mittee. 

Mr.  Ewell  :  I  agree  with  the  sentiments  of  the  gentlemen 
representing  the  Congress  on  these  resolutions,  but  I  do  think  that 
there  are  some  specific  matters  that  have  been  so  thoroughly 
threshed  out  that  it  might  be  very  desirable  if  this  Congress,  before 
adjourning,  pass  a  resolution  on  an  important  particular  matter, 
and  that  particular  matter  which  I  have  in  mind  is  the  question  of  an 
American  Merchant  ^Marine.  The  reason  why  I  would  like  to  bring 
that  in  here,  and  would  like  to  make  this  exception,  is  the  fact  that 
myself,  and  Mr.  John  D.  Long,  under  the  auspices  of  the  American 
Manufacturers'  Association,  have  discussed  this  matter  before  the 
Chambers  of  Commerce  and  Boards  of  Trade  all  over  this  country, 
from  Worcester,  in  the  old  Colonial  State  of  Massachusetts,  and 
from  the  Lakes  to  the  Gulf,  and,  in  nine  cases  out  of  ten,  those 
commercial  bodies  have  passed  resolutions  favoring  an  ocean  mail 
contract.  I  was  not  asked  to  suggest  the  means,  but  I  would  like, 
at  this  moment,  to  suggest  a  means  which  would  give  us  a  Merchant 
Marine,  in  about  two  minutes'  consideration.  I  do  not  wish  to  go 
into  any  long  discussion  of  the  matter  at  all. 

The  Chairman  :  I  would  like  to  hear  from  you,  Mr.  Ewell, 
on  that  subject. 

]\Ir.  Ewell  :  And  that  is  that  we  have  an  ocean  mail  contract, 
that  is  precisely  what  we  have  here  today,  which  we  obtained  under 
the  Harrison  Act  in  189L  It  is  not  a  subsidy.  The  ocean  mail 
w^hich  we  have  now,  should  extend  to  steamers  with  ten  or  twelve 
or  sixteen  knots  speed  to  go  on  a  long  voyage,  for  example  to  South 
America,  and  Australia  and  the  Orient,  because  it  is  utterly  impos- 
sible to  run  those  high-speed  steamers  twenty  knots,  as  is  provided 
under  the  present  Act  w^hich  gave  us  the  St.  Paul  and  St.  Louis,  the 
only  good  boats  we  had,  practically,  in  the  Spanish  war.  We  got 
those  boats  under  that  Act. 

Now,  what  we  are  trying  to  bring  about  in  Congress,  is  to  give 
us  an  Ocean  ]Mail  contract  that  will  provide  four  or  five  dollars  a 
mile  for  steamers  of  sixteen  knots  speed.     That  would  be  practical ; 


NATIONAL     BUSINESS     CONGRESS  247 


$4.00  a  mile  has  been  suggested.  Such  a  bill  canie  within  three  of 
passing  Congress,  as  you  all  know,  only  a  little  over  a  year  ago. 
There  were  only  three  votes  against  it.  The  Ocean  Mail  Bill,  pro- 
posed by  Senator  Gallinger,  did  not  reach  the  House,  but  it  provided 
for  such  a  measure,  and  it  has  been  the  consensus  of  opinion  of  this 
great  commercial  business  that  an  Ocean  Mail  contract  on  those 
lines  would  give  us  an  American  Merchant  Marine,  and  I  would 
like  to  except  from  this  general  resolution  that  you  are  offering  to  be 
passed  here,  the  matter  of  offering,  presenting  a  resolution  here  by 
this  committee,  drawn  up,  to  be  passed  by  this  Congress,  that  would 
give  us  an  Ocean  Mail  contract,  similar  to  that  suggested  in  the 
Gallinger  Bill. 

The  Chairman  :     Mr.  Ewell,  will  you  step  to  the  front  here 
and  dictate  a  resolution  just  as  ^-ou  would  like  to  have  it? 
]Mr.  Ewell:     Yes,  sir. 

-  ^Ir.  Washin'gtox  :  Mv.  Chairman,  I  doubt  the  wisdom  of 
having  any  resolutions  adopted  and  reported  back  to  this  Congress 
at  an  adjourned  Congress  for  its  action;  and  in  order  to  get  at  the 
sentiment  in  respect  to  that,  I  desire  to  move  to  amend  the  resolu- 
tion, by  adding  thereto,  in  the  appropriate  place,  the  words :  "And 
that  resolutions  so  formulated,  shall  be  reported  back  to  this  Con- 
gress at  an  adjourned  session,  to  be  held  within  six  months  from  the 
present  date — to  be  held  at  the  call  of  the  Committee  upon  comple- 
tion of  its  work." 

My  reason  for  suggesting  six  months,  was  to  give  them  all  the 
time  possible  and  still  have  the  work  completed  and  the  results  of 
the  efforts  of  this  committee  given  to  the  people  of  this  country 
before  the  National  Convention  of  either  of  the  great  political 
parties. 

The  Chairman:     There  is  another  amendment  offered  here. 

Mr.  Frost  :     I  have  that  amendment. 

The  Chairman:     ^\v.  Washington's  amendment? 

Mr.  Frost  :  Yes.  See  how  this  would  do :  "And  that  such 
declaration  of  principles  and  purposes  shall  be  reported  back  to  this 
Congress;"  do  you  want  to  put  the  limitations  within  a  certain  time? 

AIr.  Washington  :     Perhaps  that  is  not  necessary. 


248  NATIONAL     BUSINESS     CONGRESS 

Mr.  Frost:  I  might  make  one  explanation  with  reference  to 
the  committee.  There  is  nothing  said  about  reporting  back  to  this 
Congress.  The  Committee  felt  that  the  Congress  ought  to  de- 
termine for  itself  whether  it  wanted  to  reassemble,  or  the  committee 
determine  that,  and  especially  representing  the  National  Business 
League  of  America,  which  called  the  conference,  the  Committee  did 
not  want  to  be  in  a  position  of  any  apparent  precluding  of  the  judg- 
ment of  anybody,  and  we  rather  felt,  a  Committee  of  eight,  which 
w^ould  be  wise  to  carry  on  another  conference  would  call  one.  Of 
course,  if  that  meets  with  the  approval  of  the  body,  I  suppose  it 
would  be  a  pretty  good  thing. 

Mr.  Vopick.\  :     I  second  the  motion.  Mr.  Chairman. 

The  Chairman  :  You  have  heard  the  motion.  x\ll  in  favor 
say  Aye.  Contrary,  Nay.  Carried.  That  is  on  Mr.  Washington's 
amendment. 

Mr.  Frost  :  There  was  one  other  amendment  which  was  made 
and  seconded,  and  that  was  that  the  President  should  be  a  member 
of  that  committee. 

Mr.  Vopick.a.  :     I  second  that  motion. 
The  motion  was  duly  carried. 

« 

Mr.  Johnson:  Unless  there  are  some  objections,  I  think  it 
will  be  a  good  idea  to  endeavor  to  get  at  least  500  here,  representing 
all  the  organizations,  and  have  this  adjourned  meeting  in  Washing- 
ton City,  and  have  the  business  of  the  Association  in  the  form  of 
resolutions  presented  there  as  a  body. 

Mr.  \'opicka  :  You  would  get  a  larger  crowd  here  than 
you  would  in  Washington.  I  agree  that  they  have  the  right  to  select 
the  place  of  meeting.  You  might  just  as  well  leave  it  to  the  Com- 
mittee for  decision  here  as  anywhere  else. 

The  Chairman  :     The  question  is  on  the  amended  resolution. 

Mr.  Frost  :     I  will  read  the  resolution  as  it  now  stands : 

"Resok'cd,  That  the  President  of  this  National  Business  Con- 
gress be,  and  he  hereby  is,  authorized  and  directed  to  promptly  ap- 
point a  suitable  committee  (of  which  the  President  shall  be  a  mem- 
ber), to  formulate  a  declaration  of  principles  and  purposes,  which 
shall  reflect  the  necessities  and  demands  of  the  commercial,  indus- 


NATIONALBUSINESS     CONGRESS  249 

trial  and  business  interests  of  the  country,  and  that  such  declaration 
of  principles  and  purposes  shall  be  reported  back  to  this  Congress; 
and  that  your  Committee  on  Resolutions  be  discharged." 

Mr.  Sechler  :  What  number  of  members  is  to  be  on  the  Com- 
mittee ? 

Mr.  Frost  :  The  Committee  has  always  been  a  suitable  Com- 
mittee. There  has  been  no  limitations  on  its  numbers.  The  object 
was  so  that  it  would  be  large  enough  and  broad  enough,  because  of 
the  diversity  of  interests  it  represents,  to  get  the  real  consensus  of 
opinion.  Now.  whether  that  should  be  ten  or  twenty.  I  think  no- 
body in  this  body  definitely  knows. 

Mr.  Dold:  Mr.  Chairman.  I  would  like  to  know  if  that  con- 
templates requesting  ideas  of  all  the  members  of  this  body  of  the 
organization,  so  when  you  are  through  they  have  had  nothing  to 
do  with  it? 

Mr.  Frost:  I  think  that  contemplates  sending  out.  not  only 
to  every  business  organization  represented  here,  but  to  all  business 
organizations  of  the  country,  and  have  not  only  the  approval  of 
every  organization,  but  of  every  member  of  the  different  organiza- 
tions, so  when  it  comes  back  it  w'ill  be  something  that  every  man 
will  stand  by,  just  as  he  stands  by  his  Bible  or  religion,  or  party 
belief. 

Mr.  Dold  :  Should  not  that  resolution  be  amended  in  that 
respect? 

Mr.  Frost  :  The  only  trouble  about  that  is  the  character  of  the 
committee  you  would  get.  I  do  not  think  you  should  hamper  that 
committee,  because  it  is  going  to  be  a  pretty  broad-gauged  one,  and 
I  feel  that  the  committee  that  voices  the  sentiments  of  this  body  is 
going  to  do  the  very  best  thing  they  can  do. 

The  Chairman  :     You  have  heard  the  resolution,  Gentlemen. 
The  motion  was  duly  carried. 

Mr.  Washington  :  Mr.  President,  I  move  that  when  we  ad- 
journ, we  adjourn  subject  to  the  call  of  the  Chair. 

(Which  motion  was  duly  seconded  and  unanimously  carried.) 

Mr.  Sechler  :  I  move  that  a  vote  of  thanks  be  extended  by 
this  Congress  to  the  National  Business  League  of  America  for  the 
very  elegant  entertainment  they  have  given  us.  in  the  way  of  attend- 


250  NATIONAL     BUSINESS     CONGRESS 

ance  at  the  first  theatrical  performance,  the  opera  and  the  banquet 
to  be  given  tonight. 

Mr.  Bannlster:     I  second  the  motion. 
(The  motion  was  duly  carried.) 

Mr.  Ewell:     My  distinguished  brother  here  has  suggested  it 
is  getting  so  late  we  better  defer  that  resolution. 

The  Chairm.\n  :     Air.  Dold,  of  the  Jacob  Dold  Packing  Com- 
pany, has  a  short  paper  which  he  would  like  to  read  to  you. 


THE   PACKING   INTERESTS. 

Mr.  Jacob  Dold:  Mr.  Chairman  and  Gentlemen — I  had 
intended,  among  the  five-minute  talks  allotted  to  members,  to 
bring  us  a  subject  which  I  believe  is  as  near  to  this  organi- 
zation of  business  as  it  is  to  me  in  my  profession.  It  rather  stretches 
itself  out  to  six  or  eight  pages  which  I  can  probably  read  in  from 
eight  to  ten  minutes,  if  I  may  transgress  upon  your  time  to  this 
extent. 

I  came  here  expecting  to  be  an  interested  listener,  and  then  go 
home  and  report  to  the  President  of  our  Chamber  of  Commerce,  as 
its  delegate  to  this  convention,  accordingly. 

However,  the  broad,  generous,  commercial  spirit  which  has 
pervaded  this  assembly  of  the  brainy  thinkers  among  those  who  do 
things,  and  create  something  in  this  world,  has  been  most  inspiring; 
and  even  those  of  us  who  worry  along  at  home  in  our  daily  channels 
of  activity,  are  forced  to  the  realization  that  the  putting  up  of  our 
shutters  at  night,  after  the  day's  business,  does  not  by  any  means 
complete  our  whole  duty,  our  larger  civic  duty,  either  to  ourselves  or 
to  our  fellow  men,  and  business  associates  in  the  community. 

Prompted  by  these  sentiments,  it  occurred  to  me  to  utilize  this 

.opportunity  to  state  a  few  facts  and  add  a  few  words  in  behalf  of 

our  fellow  business  men  now  on  the  Anti-Trust  grill,  the  Chicago 

Packers,  and  I  do  so  purely  out  of  the  natural  sporting  desire  we  all 

have  in  us,  to  see  fair  play  for  both  friend  and  foe. 

Our  firm  has  nothing  in  common  with  the  large  packers.  We 
compete  keenly  in  all  territory  for  the  business,  and  they  force  us 
wuth  their  enterprise  to  do  more  business  than  we  really  care  to,  but 


NATIONAL     BUSINESS     CONGRESS  251 


candor  compels  me  to  admit  their  competition  is  generally  fair  and 
reasonable. 

The  Dold  Packing  Company  is  classed  among  the  "little  fel- 
lows" in  the  packing  business— the  so-called  independents.  We 
have  plants  in  the  East  and  in  the  West.  We  handle  about  1,000,- 
000  head  of  live  stock  a  year,  or  say  around  $25,000,000  of  business, 
and  while  this  is  small,  compared  to  the  magnitude  of  the  larger 
packers  centering  at  Chicago,  the  distribution  of  even  this  amount 
of  product  spreads  over  1,000  market  points  in  the  United  States 
and  Europe,  brings  us  into  such  close  competitive  contact  with  our 
competitors  that,  with  our  eyes  always  open  to  protect  our  interests, 
it  may  safely  be  presumed  that  we  at  least  know  what  is  going  on  in 
the  meat  line. 

Admitting  there  would  be  more  stability  and  more  comfort  in 
this  very  closely  figured  business  (requiring  a  large  tonnage  with 
comparatively  small  returns  on  the  daily  turn-over),  if  everyone  in 
the  trade  could  be  allowed  to  get  together  now  and  then  and  talk 
matters  over  in  a  frank  and  fair  manner,  yet  were  I  placed  before 
any  tribunal,  I  could  not  truthfully  say  there  was  apparent  any  real 
evidence  of  the  fixing  of  prices  among  the  large  packers  to  the 
studied  and  intentional  detriment  of  the  small,  or  "independent" 
packer. 

I  have  not  studied  closely  into  the  merits  of  the  proceedings 
now  going  on  against  the  large  packers  in  Chicago,  being  only  a 
naturally  interested  spectator,  yet  it  does  seem  anything  but  reassur- 
ing to  the  stability  and  safety  of  our  large  manufacturing  interests 
of  all  classes  to  see  a  bunch  of  busy  men.  not  non-producers,  but 
men  of  constructive  ability,  creators  of  industry,  and  who,  wdiat- 
ever  their  shortcomings  may  have  been,  have  surely  done  much  to 
promote  the  country's  industry  and  benefit  its  labor  as  well  as  the 
consumer,  since  never  in  the  history  of  this  industry  has  the  produc- 
ing margin  between  the  farm  price  and  the  price  to  the  dealer,  been 
so  small  and  narrow,  or  fresh  meat  so  generally  obtainable,  thus 
benefiting  both  producer  and  consumer — to  see  such  men  thus  forced 
to  neglect  their  business,  to  be  treated  like  ordinary  criminals  on 
such  seemingly  technical  grounds  for  prosecution,  and  especially  so 
to  those  who,  from  rubbing  up  against  the  buying  and  selling  end 
of  their  business  day  by  day  in  the  keenest  and  sharpest  competition, 
can  discern  no  evidence  in  their  trade  doings  to  indicate  that  in  actual 
practice  they  are  by  unfair  means  stifling  competition  in  the  meat 


252  NATIONAL     BUSINESS     CONGRESS 

line  or  fixing  prices  to  either  increase  the  cost  of  meat  to  the  con- 
sinner,  or  to  drive  competition  out  of  business.  And  it  seems 
oln-ious  they  could  not  very  well  kill  both  these  birds  with  the  one 
stone. 

As  among  the  strongest  and  most  adhesive  competitors  they 
have  in  the  fresh  meat  line,  I  don't  mind  indicating  to  you  how  they 
have  stifled  the  business  of  my  own  firm  of  oppressed  and  down- 
trodden butchers. 

In  1902,  ten  years  ago.  we  handled  a  total  of  313,000  head  of 
live  stock.  In  1912,  we  will  run  nearly  1,000,000  head,  and  the  in- 
crease has  been  steady,  year  by  year. 

In  tonnage,  the  figures  in  1902  were  50,591,000  pounds;  in  1912 
they  will  run  over  200,000,000  pounds.  In  volume  of  business,  1902 
shows  a  little  under  $5,000,000.00,  while  last  year  it  ran  over  $22,- 
000,000.00. 

The  bidding  on  government  contract,  although  open  to  every- 
body, is  generally  considered  a  big  firm's  job,  and  if  combination  in 
any  branch  of  the  business  were  easy,  it  would  be  so  in  this.  We 
first  got  into  the  game  in  1905  with  100,000  pounds,  and  year  by 
year  this  was  increased  until  the  chunk  pried  loose  from  our  trade- 
stifling  competitors  ran  up  to  1,259,000  pounds. 

And  now  that  we  are  talking  frankly  as  among  business 
men,  I  don't  mind  mentioning  a  few  figures,  which  become  public 
record  after  bids  are  awarded— showing  that  in  the  last  Navy  con- 
tract let  for  bacon,  the  bids   ran  thus: 

M  $  95,147.00 

S  ■  H 96,036.00 

S 96.346.00 

D     97,563.00 

a!    '. " 105,812.00 

a  variation  of  $10,700.00,  or  over  10%  in  a  business  whose  earnings 
on  the  turn-over  run  around  two  or  three  per  cent  net. 

In  last  bids  for  Army  supplies  they  ranged  from  $12.35  per  cwt. 
up  to  $13.62,  with  practically  all  of  the  packers  bidding,  and,  by  the 
way,  this  time  we  go  in,  being  the  lowest  bidders. 

And  these  are  fair  samples  of  the  periodical  bidding  as  far  back 
as  our  records  go. 

So  much  for  my  firm  having  been  stifled  and  side-tracked  by 
the  "Beef  Trust  Barons."  And  what  is  true  of  ourselves,  is  true 
of  every  small  and  medium-sized  packer  who  has  pushed  his  busi- 
ness in  aggressive  spirit  and  adopted  modern  up-to-date  methods 


NATIONAL     BUSINESS     CONGRESS  253 

and  systems,  and  there  are  probably  many  of  those  who  could,  no 
doubt,  show  as  large  or  even  better  progress. 

And  had  there  been  a  real  grievance  we,  or  any  of  the  above, 
as  the  really  injured  parties,  would  surely  have  been  the  first  to  make 
a  holler,  since,  being  neither  bashful  nor  under  any  obligations  to 
the  larger  packers,  there  would  have  been  every  reason  for  us  so  to 
do  and  none  to  withhold  a  kick  if  properly  coming. 

Xow,  as  to  combining  on  prices:  when  I  tell  you  that  yic  per 
pound  of  net  profit,  actually  made  on  every  pound  of  product  we 
can  produce  would  yield  16%  to  20%  on  our  capital  stock,  and  that 
if  we  could  be  guaranteed  j'ic  net  profit  for  ten  years,  we  would 
agree  to  retire.  You  may  judge  for  yourself  on  this  point,  and 
probably  conclude  with  me  that  if  there  really  was  a  sure-enough 
combination  to  fix  prices,  no  bunch  of  combining  rascals,  having  the 
power  to  do  so.  would  be  chumps  enough  to  stop  at  a  little  dinky 
one-eighth  cent  per  pound.  A  quarter  of  a  cent  per  pound  added  to 
the  meat  bill,  would  cost  the  average  family  about  five  cents  per 
week,  the  price  of  a  "chromo." 

A  large  volume  and  a  close  margin  on  the  average  turn-over 
throughout  the  year  is.  in  the  nature  of  this  business,  with  its  ups 
and  downs  of  market  fluctuations,  of  supply  and  demand,  of  the 
fickleness  of  the  public  appetite,  and.  under  present  rigid  govern- 
ment inspection  of  meats,  the  uncertainty,  after  you  have  paid  the 
honest  farmer  your  good  money  at  full  values,  as  to  whether  the 
carcass  will  pass  the  inspection  or  wall  be  chucked  into  the  grease 
tank,  and  at  your  own  loss,  of  course. 

In  this  connection  I  may  mention  that  from  fifty  to  seventy-five 
thousand  pounds  of  food  products  are  now  condemned  and  practi- 
cally confiscated  per  week  at  one  of  our  plants  only,  while  the  total 
for  all  packing  in  the  United  States  is  estimated  to  reach  probably 
the  enormous  aggregate  of  100,000,000  pounds  for  the  year,  with 
practically  no  redress,  the  packer  standing  the  entire  loss. 

This,  in  many  cases,  w-e  believe  useless  and  wanton  destruction 
of  food  products,  the  same  which  the  State  allows  the  uninspected 
packer  or  butcher  next  door  to  sell  freely  and  without  tangible  evi- 
dence of  harm  or  dissatisfaction  on  the  part  of  the  consumer,  ac- 
counts in  a  large  measure  for  shortages  in  the  meat  supply ;  while 
the  cost  of  distribution  from  the  dealer  to  the  consumer  has  been 
greatly  enhanced  because  the  majority  of  them,  since  the  fashion  of 
going  to  the  market  personally  with  a  market  basket  on  his  arm. 


254  NATIONAL     BUSINESS     CONGRESS 

nowadays,  expects  nickel-plated  fixtures  in  his  shop,  demands  princi- 
pally the  best  cuts,  say  26%  of  the  carcass — only — with  automobiles 
to  deliver  in — asks  you  to  come  to  his  home  for  the  order,  deliver 
the  meat  at  a  certain  hour  (a  sort  of  individual  delivery)  ;  wants 
you  to  send  a  man  to  solicit,  and  oftentimes  asks  you  to  drive  up 
right  away  and  exchange  it. 

People  don't  seem  to  realize  that  all  this  costs  money,  costs 
enormously,  and  contributes  in  a  very  large  degree  to  the  high  cost 
of  cheap  living,  and  some  one  has  to  pay  for  it,  and,  naturally,  it  is 
the  consumer. 

And  as  to  the  poor,  down-trodden  farmer — and,  by  the  way,  we 
haven't  heard  much  of  him  since  the  very  high  prices  of  live  stock 
the  past  year  or  two — it  is  surely  hard  for  us  to  feel  bad  for  a  pro- 
ducer supplying  the  raw  product  on  the  basis  of  making  us  pay — 
and  he  did  make  us  pay — about  $30.00  for  an  animal  that  probably 
did  not  cost  him  over  $15.00  to  produce,  as  was  the  case  last  year 
when  the  people,  led  by  some  of  the  press,  and  by  some  of  the 
politicians,  were  yammering  against  the  high  cost  of  living  and 
blaming  the  packer  who  actually  suffered  a  heavy  loss  on  every 
pound  of  meat  produced. 

There  is  just  one  more  item.  I  understand  the  packers  are  also 
charged  with  fixing  prices  on  products  sent  to  branches  through  the 
medium  of  what  is  known  to  every  packer  shipping  to  branches,  as 
the  "request  price,"  or,  in  other  w^ords,  the  "guessed  price" — since 
we  had  to  guess  at  w'hat  the  salesman  will  finally  get  for  the  profits 
and  also  what  the  buyer  will  pay  for  it. 

One  of  the  earliest  records  we  have  of  selling  beef  in  the  old- 
fashioned,  slip-shod,  catch-as-catch-can  w-ay,  was  when  a  lad  by  the 
name  of  "Jack"  swapped  the  family  cow  for  a  few  beans,  simply 
because  nobody  had  posted  him  as  to  the  probable  market  value  of 
the  animal.  And  the  family  would  brobably  have  "gone  broke" 
had  not  the  story-teller  helped  him  out,  and  in  something  like  the 
way  the  so-called  beef  trust  is  charged  with  doing. 

The  modern  and  practical  way  to  market  the  cow  nowadays  is 
for  Bill  to  get  about  $30.00  for  "that  air  critter,"  and  if  he 
cannot  do  that,  do  the  best  he  can,  and  if  Bill  comes  home  with 
$27.50  or  even  $25.00,  the  farmer  feels  he  has  "done  well." 

Now,  that  is  what  the  packer,  either  large  or  small,  has  to  do 
when  shipping  products  to  the  often  uncertain  business  ability  of 
the  salesmen  at  the  other  end  when  matched  up  against  the  shrew^d. 


NATIONAL     BUSINESS     CONGRESS  255 

practical  butcher,  who  is  usually  an  expert  business  man,  and  a  close 
sharp  buyer. 

Cattle  are  often  killed  one  day  and  shipped  the  next,  which  does 
not  always  give  time  to  figure  out  the  exact  cost  of  dressed  beef 
before  delivery. 

Then  in  a  bunch  of,  say  100  cattle,  even  though  shipped  from 
the  same  feed  lot,  there  are  likely  to  be  from  four  to  half  a  dozen 
different  qualities,  or  "grades"  we  call  them,  each  with  a  separate, 
intrinsic  market  value.  Therefore,  the  "request  price,"  or  "guess 
price"  on  the  probable  price  the  product  should  fetch  when  sold  on 
the   market   by   the   salesman. 

He  could  not,  by  any  means,  be  expected  to  be  held  firmly  to 
that  price,  since  the  fluctuations  of  the  market,  the  influence  of  the 
weather,  supply  and  demand,  and  the  factor  of  general  competi- 
tion are  far  too  uncertain  and  must  be  considered — he  is  simply  ex- 
pected to  do  the  best  he  can. 

And  if,  by  chance,  he  does  now  and  then  get  full  or  better  than 
the  "request  price,"  we  look  upon  it  as  a  sort  of  windfall,  and  feel 
that  he  "did  well." 

Gentlemen,  I  thank  you.     (Applause.) 

The  following  communication  was  read,  as  indicating  the  enor- 
mous harm  the  present  agitation  is  likely  to  do,  both  to  the  packing 
interests  and  the  live  stock  interests  of  this  country,  and  indirectly 
to  general  business : 

"WAR  OFFICE,  LONDON,  S.  W. 

(Ref.)  16th  November,  1911. 

Contracts  Firms  A-979-2 : 

Gentlemen:  In  reply  to  your  letter  of  the  eleventh  inst.,  I 
am  directed  to  inform  you  that  pending  the  ultimate  of  the  pro- 
ceedings in  the  United  States  of  America,  against  certain  meat- 
packing firms,  it  has  been  decided  that  none  of  the  firms  in- 
volved shall  be  invited  to  tender  for  Army  supplies. 

I  am,  Gentlemen,  Your  Obedient  Servant, 
(Signed)  N.  F.  B.  Osborx, 

For  Director  of  Army  Contracts." 

The  Chairman  :     We  stand  adjourned  until  this  evening. 


256  NATIONAL     BUSINESS     CONGRESS 


THE  CONSULAR  SITUATION. 


By  Austin  A.  Burxham,  General  Secretary  of  the  National 
Business  League  of  America. 


(Presentation  omitted  for  lack  of  time  before  the  Banquet.) 


Mr.  Chairman  and  Gentlemen  of  the  Congress: 

Since  the  organization  of  this  Government,  until  the  year  1906, 
appointments  to  the  American  Consular  service  were  made  more 
upon  grounds  of  party  service  and  party  affiliation,  than  for  fitness. 

While  the  nation  was  young,  however,  and  our  foreign  trade 
activities  were  comparatively  few,  the  necessity  for  an  ef^cient  con- 
sular service  was  not  keenly  felt,  and  the  spoils  policy  of  the  ap- 
pointing powers  was  endured  without  emphatic  protest ;  but,  as  our 
foreign  commerce  became  an  important  factor  of  our  progress  and 
prosperity,  and  the  demand  for  larger  foreign  markets  increased, 
the  need  of  a  thoroughly  competent  consular  service  became  impera- 
tive, for  upon  the  business  ability  of  the  consul  his  value  to  his 
country  depends ;  not  that  he  is  expected  to  sell  x-Xmerican  products, 
but  to  discover  and  report  opportunities  to  that  end. 

The  need  for  a  higher  standard  of  efficiency  finally  became  so 
acute  that,  about  twelve  years  ago,  there  was  a  nation-wide  organ- 
ized efifort  on  the  part  of  business  interests  to  secure  enactment 
of  a  law  that  would  result  in  placing  the  consular  service  on  a  per- 
manent merit  and  business  basis ;  making  qualification  the  test  for 
appointment  and  achievement  the  open  sesame  to  promotion. 

Since  the  movement  began  many  consular  bills  have  been  intro- 
duced in  the  Senate  and  House ;  most  of  them  contained  merit  pro- 
visions ;  a  few  were  reported  with  amendments,  but  died  on  the  cal- 
endar ;  the  remainder  were  pigeon-holed  by  the  committees  in  charge 
with  the  exception  of  the  comprehensive  Lodge  Bill,  No.  1345, 
which,  after  being  stripped  of  all  its  merit  provisions  by  the  Senate 
Committee  on  Foreign  Relations,  was  enacted  April  5,  1906.  The 
discarded  merit  provisions  of  the  Lodge  Bill,  however,  were  incor- 
porated in  President  Roosevelt's  executive  order  of  June  27,  1906, 
and  made  operative  on  that  date.  Whatever  improvement  has  been 
made  in  the  consular  service  since  that  time  must  be  credited  to  the 
executive  order.     Soon  afterward,   during  the   Sixtieth   Congress, 


NATIONAL     BUSINESS     CONGRESS  257 

business  interests  commenced  a  vigorous  campaign  to  secure  enact- 
ment of  an  adequate  law,  by  the  introduction  of  the  Hopkins- 
Lowden  bill,  which  was  not  reported.  The  Cullom-Sterling  bill 
followed  in  the  Sixty-first  Congress,  but  that  measure  was  laid  on 
the  table  by  the  Senate  Committee  on  Foreign  Relations  on  the 
alleged  grounds  of  unconstitutionality,  January  26,  1910,  and  the 
action  of  the  committee  given  to  the  press.  So  far  as  we  are 
advised,  this  was  the  first  public  statement  of  that  committee  to  the 
effect  that  that,  or  any  of  the  consular  bills  previously  introduced, 
was  unconstitutional. 

Taking  the  rejected  Cullom-Sterling  bill  intact,  the  National 
Business  League  of  America  has  incorporated  with  it  provisions 
grading  the  secretaries  of  the  diplomatic  service,  placing  them  under 
the  merit  system  somewhat  similar  to  the  general  plan  of  the  Exe- 
cutive Order,  issued  by  President  Taft  on  November  26,  1909,  and 
framed  the  new  Bill  S.  3621,  introduced  by  Senator  Nelson  of  Min- 
nesota, December  11,  1911,  the  same  being  identical  with  H.  R. 
15,925,  introduced  by  Representative  Foss  of  Illinois,  December  15, 
1911.  Briefly  stated,  the  bill,  the  merit  principles  of  which  have, 
for  many  years,  been  endorsed  and  urged  by  every  business  interest 
in  the  United  States,  and  recently  by  the  American  Chamber  of 
Commerce  in  Paris  and  American  Association  of  Commerce  and 
Trade  in  BerHn,  provides: 

First — Appointment  of  candidates,  within  reasonable  age  limits, 
to  the  lower  grades  of  the  service,  after  thorough  examination.  All 
candidates  to  be  designated  by  the  President  for  appointment,  sub- 
ject to  examination. 

Second — Vacancies  in  the  higher  grades  of  the  consular  service 
to  be  filled  by  promotion  from  the  lower  grades  on  the  basis  of 
efficiency. 

Third — Creation  of  an  Examination  Board  with  rules  for  ex- 
amination of  candidates. 

Fourth — Complete  Americanization  of  the  service. 

Fifth — Appointment  of  consuls  and  consul-generals  to  grades 
instead  of  to  places ;  designation  of  places  to  be  made  by  the  Presi- 
dent. 

Sixth — The  Government  to  pay  the  actual  expense  of  trans- 
ferring a  consul,  his  family  and  effects,  when  ordered  to  a  new  post. 

Seventh— Grading  the  Secretaries  of  the  Diplomatic  Service, 
with  fair  compensation.     Appointment  and  promotion  to  be  under 


258  NATIONAL    BUSINESS    CONGRESS 


examination  rules  and  records  for  efficiency,  similar  to  those  pro- 
vided for  the  consular  service. 

Eighth — As  between  candidates  of  equal  merit,  proportional 
representation  of  all  the  States  and  Territories  in  the  consular 
service.     Political  affiliations  of  candidates  not  to  be  considered. 

THE  LOWDEN  BILL. 

Near  the  close  of  the  third  and  final  session  of  the  Sixty-first 
Congress,  Representative  Lowden  of  Illinois  introduced  a  short 
form  bill,  which  provides  for  the  classification  and  compensation 
of  Secretaryships  in  the  Diplomatic  Service,  with  provisions  for  ex- 
amination, appointment  and  promotion,  covering  the  consular 
service  also.  The  bill  requires  the  Secretary  of  State  to  publish,  for 
the  information  of  the  President,  a  list  of  candidates  who  have 
passed  a  creditable  examination ;  but  there  the  matter  might  rest,  as 
the  bill,  if  enacted,  would  impose  no  obligation  whatever  upon  the 
President,  nor  upon  the  Senate,  to  appoint  or  promote  from  the 
published  list.  The  bill  provides  for  an  Examination  Board,  but  does 
not  provide  for  an  examination  rating-scale,  or  for  an  age  limit  to 
determine  eligibility,  and  age  largely  determines  the  measure  of  fit- 
ness and  length  of  efficient  service.  No  provision  is  made  for  the 
complete  Americanization  of  the  consular  service,  nor  for  the  ap- 
pointment of  consuls  and  consuls-general  to  grades,  instead  of  to 
places,  nor  for  the  transfer  of  a  consular  official,  his  family  and 
eflfects,  from  post  to  post,  at  the  expense  of  the  Government,  all  of 
which  are  included  in  the  Nelson-Foss  bill. 

So  far  as  placing  the  consular  service  on  a  permanent  merit 
and  business  basis,  through  the  inevitable  changes  of  party  admin- 
istration, the  Lowden  bill,  if  enacted,  would  be  "more  honor'd  in  the 
breach  than  the  observance." 

Notwithstanding  the  Senate  Committee  on  Foreign  Relations 
has  pronounced  the  merit  provisions  of  the  Cullom-Sterling  bill, 
now  incorporated  in  the  Nelson-Foss  bill,  unconstitutional  under 
that  section  of  the  Constitution  which  provides  that  "The  President 
shall  nominate,  and,  by  and  with  the  advice  and  consent  of  the 
Senate,  shall  appoint  consuls,"  it  is  not  believed  that  the  Nelson- 
Foss  bill  would  interfere  with  the  Constitutional  right  of  the  Presi- 
dent to  nominate  and  appoint,  nor  with  the  right  of  the  Senate  to 
advise  and  consent,  as  the  merit  system  as  incorporated  in  the  Nel- 
son-Foss bill   simply   regulates   the  exercise   of   the   constitutional 


NATIONAL     BUSINESS     CONGRESS  259 


power  and  protects  the  President  and  the  Senate  against  the  ap- 
pointment of  incompetent  men  to  the  foreign  service,  by  providing 
that  only  those  candidates  who  have  been  designated  by  the  Presi- 
dent for  appointment,  subject  to  examination,  and  have  passed  with 
credit  before  an  Examining  Board,  shall  be  eligible  for  appointment 
to  the  lower  grades  of  the  foreign  service. 

The  only  objection  to  a  consular  law  which  would  obligate  the 
President  and  the  Senate  (as  would  the  Nelson-Foss  bill)  being  a 
question  of  constitutionality,  the  crux  of  the  situation  is  simply  a 
matter  of  interpretation  of  the  spirit  and  purpose  of  the  Constitu- 
tion. In  this  connection,  as  showing  certain  broad  views  of  the 
limits  of  the  Constitution,  by  eminent  authorities,  the  following 
quotations  are  submitted : 

President  Taft  at  Augusta,  Ga.,  just  before  his  inauguration, 
said :  "That  Constitution,  simple,  clear,  and  comprehensive,  has  in 
the  past  been  capable  of  so  fair  construction  as  to  meet  in  a  marvel- 
ous way  the  developments  and  emergencies  of  our  country,  which 
could  not  have  been  anticipated  by  those  who  framed  it,  in  any  detail 
at  all,  and  I  am  certain  that  the  same  Constitution  will  meet  the 
emergencies  which  may  come  in  the  future." 

Again  at  New  York:  "When  we  examine  that  wonderful  in- 
strument, we  find  that  the  men  who  made  it,  made  it  short,  com- 
prehensive and  simple,  that  it  might  be  open  for  us  to  carry  out  what 
the  future  had  in  its  womb — problems  of  which  they  could  see  only 
the  hazy  outlines." 

Those  patriots  in  homespun,  the  authors  of  the  Constitu- 
tion, with  their  simple  needs,  planning  for  the  future  of  a  mighty 
nation,  then  in  embryo,  saw  but  the  distant  headlands  of  the  future. 
They  could  hardly  "look  into  the  seeds  of  time  and  say  which  grain 
would  grow  and  which  would  not."  They  wrought  as  best  they 
knew,  leaving  posterity  to  supplement  by  enactment  such  details  to 
the  general  plan  as  conditions  might,  from  time  to  time,  demand, 
without,  however,  violating  any  of  the  provisions  of  that  remarkable 
document. 

Another  eminent  authority  was  Mr.  Justice  Story  of  the  United 
States  Supreme  Court,  who  referred  to  the  general  character  of  the 
Constitution  as  follows: 

"The  Constitution  unavoidably  deals  in  general  language.  It 
did  not  suit  the  purposes  of  the  people,  in  framing  this  great  charter 
of  our  liberties,  to  provide  for  minute  specifications  of  its  powers. 


260  NATIONAL     BUSINESS     CONGRESS 


or  to  declare  the  means  by  which  those  powers  should  be  carried 
into  execution.  It  was  foreseen  that  this  would  be  a  perilous  and 
difficult,  if  not  an  impracticable,  task.  The  instrument  was  not  in- 
tended to  provide  merely  for  the  exigencies  of  a  few  years,  but  was 
to  endure  through  a  long  lapse  of  ages,  the  events  of  which  were 
locked  up  in  the  inscrutable  purposes  of  Providence.  It  could  not 
be  foreseen  what  new  changes  and  modifications  of  power  might  be 
indispensable  to  effectuate  the  general  objects  of  the  charter;  and 
restrictions  and  specifications,  which,  at  the  present,  might  seem 
salutary,  might,  in  the  end,  prove  the  overthrow  of  the  system  itself. 
Hence,  its  powers  are  expressed  in  general  terms,  leaving  to  the 
legislature,  from  time  to  time,  to  adopt  its  own  means  to  effectuate 
legitimate  objects,  and  to  mold  and  model  the  exercise  of  its  powers, 
as  its  own  wisdom  and  the  public  interests  should  require." 

In  an  argument  for  the  enactment  of  a  Lodge  bill,  before  the 
Committee  on  Foreign  Affairs  of  the  House  of  Representatives, 
January  25,  1900,  the  late  John  W.  Ela,  then  the  General  Counsel 
of  the  National  Business  League  of  America,  referred  to  the  Con- 
stitutionality of  the  merit  system  as  follows : 

"The  question  of  the  constitutionality  of  a  law  which  requires 
the  appointments  of  consuls  to  be  only  made  from  persons  who  have 
passed  an  examination — in  view  of  the  fact  that  the  Constitution 
puts  the  appointment  of  consuls  into  the  hands  of  the  President, 
with  the  approval  of  the  Senate — has,  I  know,  been  raised  at  various 
times. 

"Upon  the  examination  of  this  question  we  believe  that  even  if 
a  bill  should  be  so  framed  it  would  not  be  held  unconstitutional. 
The  question  has  not  been  raised  in  the  Supreme  Court  of  the 
United  States,  but  there  are  decisions  of  state  supreme  courts  that 
requirements  of  the  same  character  in  civil  service  laws  which  direct 
that  the  appointment  shall  be  made  of  one  out  of  three  applicants, 
found  to  be  fit  by  examination,  do  not  take  the  power  of  appoint- 
ment away  from  the  appointing  officer,  but  are  merely  regulations 
for  ascertaining  qualifications,  and  are  constitutional. 

"The  same  principle  seems  to  have  been  acted  upon  by  Congress 
in  its  legislation  on  consular  matters,  for  in  1855,  and  later,  it  has 
prescribed  where  consuls  shall  be  sent,  and  their  rank  and  salaries." 

While  it  is  true  that  in  the  cases  before  the  state  supreme 
courts,  above  referred  to,  the  offices  were  created  by  legislative 
enactment,  not  by  constitutional  provision,  yet  the  constitutionality 


NATIONAL    BUSINESS     CONGRESS  261 

of  the  merit  principle  of  examination,  appointment  and  promotion, 
as  involving  all  branches  of  the  public  service,  federal,  state  and 
municipal,  is  clearly  indicated  and  emphasized  in  the  course  of  an 
opinion  delivered  by  the  late  Mr.  Justice  Peckham  (then  Justice 
of  the  Supreme  Court  of  the  State  of  New  York;  later  Associate 
Justice  of  the  United  States  Supreme  Court)  in  the  case  of  Rogers 
vs.  Common  Council  of  Buffalo,  supra,  as  follows :  "Looking  at  it 
as  a  matter  of  common  sense,  we  are  quite  sure  that  the  framers  of 
our  organic  law  never  intended  to  oppose  a  constitutional  barrier  to 
the  right  of  the  people,  through  their  legislature,  to  enact  laws 
which  should  have  for  their  sole  object  the  possession  of  fit  and 
proper  qualifications,  for  the  performance  of  the  duties  of  a  public 
ofiice  on  tlie  part  of  him  who  desired  to  be  appointed  to  such  office. 
So  long  as  tlie  means  adopted  to  accomplish  such  end  are  appro- 
priate therefor,  they  must  be  within  the  legislative  power.  The 
idea  cannot  be  entertained  for  one  moment,  that  any  intelligent  peo- 
ple would  have  consented  to  so  bind  themselves  with  constitutional 
restrictions  on  the  power  of  their  own  representatives,  as  to  prevent 
the  adoption  of  any  means  by  which  to  secure,  if  possible,  honest 
and  intelligent  service  in  public  office." 

As  the  appointing  power  for  the  Consular  Service  is  vested 
equally  in  the  President  and  the  Senate,  and  the  President  desig- 
nates for  appointment,  subject  to  examination,  upon  recommenda- 
tions of  the  Senators,  there  seems  to  be  no  valid  reason  why  the 
Chief  Executive  and  the  Legislative  branch  of  the  Government 
should  not  agree  upon  the  enactment  of  a  consular  measure  making 
permanently  operative  the  merit  principles  of  the  Executive  Orders, 
as  provided  by  the  Nelson-Foss  bill.  Any  consular  law,  optional 
with  the  President  and  the  Senate  to  obey  or  disregard,  would  prove 
to  be  absolutely  worthless  so  far  as  permanence  is  concerned. 

Executive  Orders  are  simply  temporary  rules  of  action  for  the 
formulation  and  operation  of  a  system  for  the  general  welfare, 
pending  enactment  of  adequate  legislation.  The  merit  system  as 
now  applied  to  the  consular  service,  is  an  unqualified  success.  Our 
national  legislators  admit  it,  yet,  while  extolling  the  present  high 
standard  of  appointments,  deplore  the  only  means  yet  suggested  to 
make  that  standard  secure  for  all  time. 

The  efforts  of  business  interests  to  secure  enactment  of  an  ade- 
quate consular  law,  constitute  a  leading  factor  of  the  struggle  to 


262  NATIONAL    BUSINESS    CONGRESS 

permanently  substitute  the  "Merit  System"  for  the  vicious  "Spoils 
System"  in  the  selection  of  American  citizens  for  the  public  service. 

Adherence  to  the  merit  system,  under  a  national  statute,  will 
give  to  our  foreign  service  "Tall  men,  sun  crowned,"  who  will  carry 
American  prestige,  good  will  and  commercial  supremacy  to  the  re- 
motest parts  of  the  world. 

The  "Spoils  System"  offers  a  premium  for  dishonesty,  extrava- 
gance and  incapacity.  It  is  even  responsible  for  high  crimes  and 
misdemeanors.  It  has  nerved  the  arm  of  the  assassin  to  strike 
down  the  Chief  Executive  of  more  than  one  great  nation.  Ameri- 
can business  men  should  rise  in  one  united  effort  and  retire  it  for- 
ever from  the  appointive  and  legislative  powers  of  American  gov- 
ernment. 

THE  NELSON-FOSS  BILL. 


S.  3621— H.  R.  15,925— Sixty-Second  Congress. 


For  the  Permanent  Improvement  of  the  Consular  and  Diplomatic  Service. 
Be  it  enacted  by  the  Senate  and  House  of  Representatives  of 
the  United  States  of  America  in  Congress  assembled,  That  the 
consular  and  diplomatic  system  of  the  United  States  be  reorganized 
in  the  manner  hereinafter  provided  in  this  Act,  and  under  such 
rules  and  regulations,  not  inconsistent  herewith,  as  shall  be  pre- 
scribed by  the  President,  subject  always  to  the  advice  and  consent 
of  the  Senate. 

Sec.  2.  That  vacancies  in  the  office  of  consul  general  and  in 
the  office  of  consul  above  class  eight  shall  be  filled  by  promotion 
from  the  lower  grades  of  the  Consular  Service,  based  upon  ability 
and  efficiency,  as  shown  in  the  service.  Vacancies  in  the  office  of 
consul  of  class  eight  and  of  consul  of  class  nine  shall  be  filled — 

(a)  By  promotion  on  the  basis  of  ability  and  efficiency,  as 
shown  in  the  service,  of  consular  assistants  and  of  vice  consuls, 
deputy  consuls,  consular  agents,  student  interpreters,  and  interpret- 
ers in  the  Consular  and  Diplomatic  Services  who  shall  have  been 
appointed  to  such  office  upon  examination. 

(b)  By  new  appointments  of  candidates  who  have  passed  a 
satisfactory  examination  for  appointment  as  consul,  as  hereinafter 
provided. 

Sec.  3.  That  the  Chief  of  the  Consular  Bureau,  the  Chief  of 
the  Bureau  of  Manufactures  of  the  Department  of  Commerce  and 


NATIONAL     BUSINESS     CONGRESS  263 

Labor,  and  the  Chief  Examiner  of  the  Civil  Service  Commission 
shall  constitute  a  board  of  examiners  for  admission  to  the  Consular 
Service. 

Sec.  4.  That  it  shall  be  the  duty  of  the  board  of  examiners  to 
formulate  rules  for  and  hold  examinations  of  applicants  for  admis- 
sion to  the  Consular  Service.  The  scope  and  method  of  the  ex- 
aminations shall  be  determined  by  the  board  of  examiners,  but 
among  the  subjects  shall  be  included  at  least  one  modern  language 
other  than  English ;  the  natural,  industrial,  and  commercial  re- 
sources and  the  commerce  of  the  United  States,  especially  with 
reference  to  the  possibilities  of  increasing  and  extending  the  trade 
of  the  United  States  with  foreign  countries ;  political  economy ;  ele- 
ments of  international,  commercial,  and  maritime  law.  Examina- 
tion papers  shall  be  rated  on  a  scale  of  one  hundred,  and  no  person 
rated  at  less  than  eighty  shall  be  eligible  for  certification.  No  one 
shall  be  examined  who  is  under  twenty-one  or  over  forty  years  of 
age,  or  who  is  not  a  citizen  of  the  United  States,  or  who  is  not  of 
good  character  and  habits  and  physically  and  mentally  qualified  for 
the  proper  performance  of  consular  work,  or  who  has  not  been 
specially  designated  by  the  President  for  appointment  to  the  Consu- 
lar Service  subject  to  examination. 

Sec.  5.  That  whenever  a  vacancy  shall  occur  in  the  eighth  or 
ninth  class  of  consuls  which  the  President  may  deem  it  expedient 
to  fill,  the  Secretary  of  State  shall  inform  the  board  of  examiners, 
who  shall  certify  to  him  the  list  of  those  persons  eligible  for  ap- 
pointment, accompanying  the  certificate  with  a  detailed  report  show- 
ing the  qualifications,  as  revealed  by  examination,  of  the  persons 
so  certified.  If  it  be  desired  to  fill  a  vacancy  in  a  consulate  in  a 
country  in  which  the  United  States  exercises  extraterritorial  juris- 
diction the  Secretary  of  State  shall  so  inform  the  board  of  exam- 
iners, who  shall  include  in  the  list  of  names  certified  by  it  only 
such  persons  as  have  passed  the  examination  provided  for  in  this 
Act,  and  who  also  have  passed  an  examination  in  the  fundamental 
principles  of  the  common  law,  the  rules  of  evidence,  and  the  trial 
of  civil  and  criminal  cases.  The  list  of  names  which  the  board  of 
examiners  shall  certify  shall  be  sent  to  the  President  for  his  in- 
formation. 

Sec.  6.  That  it  shall  be  the  duty  of  the  board  of  examiners  to 
formulate  rules  for  and  hold  examinations  of  persons  designated 
for  appointment  as  consular  assistant,  or  as  student  interpreter,  and 


264  NATIONAL     BUSINESS     CONGRESS 

of  such  persons  designated  for  appointment  as  vice  consul,  deputy 
consul,  and  consular  agent,  as  shall  desire  to  become  eligible  for 
promotion.  The  scope  and  method  of  such  examination  shall  be 
determined  by  the  board  of  examiners,  but  it  shall  include  the  same 
subjects  hereinbefore  prescribed  for  the  examination  of  consuls. 
Any  vice  consul,  deputy  consul,  and  consular  agent  now  in  the 
service,  upon  passing  such  an  examination,  shall  become  eligible 
for  promotion  as  if  appointed  upon  such  examination.  All  pro- 
posed promotions  in  the  Consular  Service  shall  first  be  approved  by 
the  examining  board,  which  shall  be  advised  by  the  Chief  of  the 
Consular  Bureau  in  regard  to  the  service  records  of  the  candidates 
for  promotion.  No  promotion  shall  be  made  except  for  efficiency, 
as  shown  by  the  work  that  the  officer  has  accomplished,  the  ability, 
promptness,  and  diligence  displayed  by  him  in  the  performance  of 
all  his  official  duties,  his  conduct,  and  his  fitness  for  the  Consular 
Service.  No  person  who  is  not  an  American  citizen  shall  be  ad- 
mitted to  the  Consular  Service  as  a  consular  assistant,  vice  or 
deputy  consul,  consular  agent,  or  student  interpreter. 

Sec.  7.  That  as  between  candidates  of  equal  merit,  appoint- 
ments of  consuls  general  and  consuls  shall  be  so  made  as  to  secure 
proportional  representation  of  all  the  States  and  Territories  in  the 
Consular  Service ;  and  neither  in  the  designation  for  examination  or 
certification  for  appointment  will  the  political  affiliations  of  the 
candidates  be  considered. 

Sec.  8.  That  all  appointments  of  consuls  and  consuls  general 
of  the  United  States  shall  be  made  to  grades  instead  of  to  places, 
and  the  President  shall  make  assignments  to  such  places  as  he  may 
deem  proper. 

Sec.  9.  That  the  United  States  Government  shall  bear  the 
actual  expense  of  transferring  a  consul  or  consul  general,  his  fam- 
ily and  his  effects,  when  ordered  to  a  new  post. 

Sec.  10.  That  the  Secretary  of  State  shall  report  from  time 
to  time  to  the  President,  along  with  his  recommendations  for  pro- 
motion, or  for  transfer  between  the  Department  of  State  and  the 
Diplomatic  Service,  the  names  of  those  secretaries  in  the  Diplomatic 
Service,  who,  by  reason  of  efficient  service,  an  accurate  record  of 
which  shall  be  kept  in  the  Department  of  State,  have  demonstrated 
special  efficiency,  and  also  the  names  of  persons  found  upon  exam- 


NATIONAL     BUSINESS     CONGRESS  265 

ination  to  have  fitness  for  appointment  to  the  lower  grades  of  the 
service. 

Sec.  11.  That  the  secretaryships  in  the  Diplomatic  Service  are 
hereby  graded  and  classified  as  follows :  Class  one,  three  thousand 
dollars,  secretaries  of  embassy;  class  two,  two  thousand  six  hun- 
dred and  twenty-five  dollars,  secretaries  of  legation ;  class  three, 
two  thousand  dollars,  secretary  of  legation  and  second  secretaries  of 
embaissy;  class  four,  one  thousand  eight  hundred  dollars,  second 
secretaries  of  legation ;  class  five,  one  thousand  two  hundred  dollars, 
third  secretaries  of  embassy  or  legation. 

Sec.  12.  That  the  board  of  examiners  for  the  Diplomatic 
Service  shall  be  composed  of  an  Assistant  Secretary  of  State,  the 
Chief  Examiner  of  the  Civil  Service  Commission,  or  such  other 
officer  as  that  commission  shall  designate,  a  law  officer  of  the 
Department  of  State,  and  one  other  officer  to  be  designated  by  the 
Secretary  of  State. 

Sec.  13.  That  the  scope  and  method  of  the  examinations  shall 
be  determined  by  the  board  of  examiners,  but  the  examinations 
shall  include  business  experience  and  ability,  the  resources  and  com- 
merce of  the  United  States,  with  special  reference  to  the  develop- 
ment of  export  trade,  international,  commercial,  and  maritime  law 
and  history,  American  history,  government,  and  institutions,  and 
one  language  other  than  English.  These  examinations  shall  be  held 
at  least  once  annually,  and  shall  be  conducted  with  strict  impar- 
tiality, and  without  regard  to  the  political  or  other  affiliations  of 
any  candidate,  and  upon  their  conclusion  the  board  of  examiners 
shall  certify  in  writing  to  the  Secretary  of  State  the  names  of  those 
persons  whom  they  have  found  to  be,  in  their  judgment,  thoroughly 
w^ell  qualified  for  the  Diplomatic  Service ;  and  the  report  of  the 
board  shall  be  made  public,  and  the  Secretary  of  State  shall  at  the 
same  time  make  a  public  statement  of  the  proportional  representa- 
tion of  the  diflferent  States  and  Territories  in  the  foreign  service. 
No  person  who  is  not  an  American  citizen  shall  be  appointed  to  a 
secretaryship  in  the  Diplomatic  Service. 

Sec.  14.  That  examination  papers  shall  be  rated  on  a  scale  of 
one  hundred,  and  no  person  with  a  general  rating  of  less  than 
eighty  shall  be  certified  as  eligible.  No  person  shall  be  certified  as 
eligible  who  is  under  twenty-one  or  over  forty  years  of  age,  or 


266  NATIONAL     BUSINESS     CONGRESS 

who  is  not  a  citizen  of  the  United  States,  or  who  is  not  of  good 
character  and  habits  and  physically,  mentally,  and  temperamentally 
qualified  for  the  proper  performance  of  diplomatic  work,  or  who 
has  not  been  specially  designated  by  the  President  for  appointment 
to  the  diplomatic  service  subject  to  examination  and  subject  to  the 
occurrence  of  an  appropriate  vacancy. 

Sec.  15.     That  this  Act  shall  take  effect  ninety  days  after  its 
passage. 

Sec.  16.     That  all  Acts  or  parts  of  Acts  inconsistent  with  this 
Act  are  hereby  repealed. 


NATIONAL     BUSINESS     CONGRESS  267 


RECEPTION  AND  BANQUET. 


Wednesday  Evening. 


In  Honor  of  the  Speakers  and  Delegates  of  the  Congress. 


Mr.  Geo.  W.  Sheldon,  President  of  the  National  Business 
League  of  America,  acting  as  Toastmaster. 

Invocation  by  the  Rev.  Charles  N.  Stuart. 

Blessed  art  Thou,  O  God,  Our  Father,  from  whom  cometh 
every  good  and  perfect  gift  we  enjoy. 

We  give  Thee  thanks  for  the  gifts  of  Thy  love  unnumbered  by 
Thee  and  undeserved  by  us. 

Let  the  memory  of  Thy  goodness  fill  our  hearts  with  joy  and 
thankfulness  even  to  the  end  of  life. 

Bless  us  in  our  fellowship  here  tonight. 

Bless  our  nation,  state  and  city,  bless  all  who  are  in  authority, 
that  law  and  order,  justice  and  peace,  may  everywhere  prevail. 

Bless  those  upon  whom  rest  the  burden  and  responsibility  of 
great  industrial  and  commercial  enterprise,  that  by  their  manifest 
spirit  of  justice  and  brotherly  kindness  the  happy  day  may  come 
when  all  men's  good  shall  be  each  man's  rule  through  all  the  circle 
of  the  golden  years. 

Direct  us,  O  Lord,  in  all  our  doings  with  Thy  gracious  favor, 
and  further  us  with  Thy  continual  help,  that  in  all  our  works,  begun, 
continued,  and  ended  in  Thee  we  may  glorify  Thy  name,  and 
finally,  by  Thy  mercy,  obtain  everlasting  life,  through  Jesus  Christ 
our  Lord.     Amen. 

The  Toastmaster:  Honored  Guests  and  Members  of  the 
National  Business  League  of  America:  Whatever  of  good  may 
come  out  of  this  conference,  it  is  primarily  due  to  our  worthy  Gen- 
eral Secretary,  Mr.  Austin  A.  Burnham.     (Applause.) 

He  came  to  me  some  months  ago  and  said  that  he  believed  that 
it  was  time  that  the  business  men  of  this  country  should  get  to- 
gether to  consider  their  own  welfare.  He  also  felt  that  it  was 
incumbent  upon  the  National  Business  League  of  America  to  invite 
the  business  men  to  come  to  Chicago  and  deliberate  upon  the  ques- 


268  NATIONAL     BUSINESS     CONGRESS 

tions  which  have  been  paramount  before  us  for  the  past  number 
of  months  and  years.  I  hesitated  some  considerable  time  before 
giving  my  consent.  But,  thinking  the  matter  over,  it  occurred  to 
me  that  Mr.  Burnham  was  right,  and  we  proceeded  along  the  line 
of  getting  the  business  men  of  this  country  together  as  far  as  we 
could  to  discuss,  you  might  say,  their  own  national  affairs. 

The  results  of  the  deliberations  of  the  past  three  days  have 
been  to  me  personally  very  satisfactory.  We  have  not  had  a  great 
quantity,  but  we  have  had  much  quality.  We  are  satisfied  that, 
within  tlie  next  few  months,  the  result  of  these  three  days'  meet- 
ings will  begin  to  make  itself  felt.  Certainly  it  will,  if  the  gentlemen 
who  have  been  here  attending  this  conference  will  do  what  they 
have  suggested  should  be  done,  and  what  they  have  promised  to  do. 

I  am  not  here  tonight  to  deliver  an  address.  I  am  not  com- 
petent, but  we  have  with  us  many  who  are  competent  to  tell  us 
what  we  ought  to  do,  and  I  am  sure  that  you  are  going  to  listen 
to  them  with  a  great  deal  of  interest. 

I  believe  you  will  agree  that  it  is  a  matter  of  fact  and  of  his- 
tory that  the  men  who  are  best  equipped  and  whose  services  to 
their  fellow-men  and  to  their  country  prove  to  be  the  most  prolific 
of  lasting  beneficial  results,  are  the  men  who  make  the  least  ex- 
ploitation of  their  accomplishments.  With  this  in  mind  we  are 
indeed  fortunate  in  the  selection  of  the  first  speaker  of  the  evening. 
For  nearly  two  decades  he  has  been  continuously  active  in  the  sci- 
entific fields  of  economics,  industry,  foreign  and  domestic  com- 
merce, rail,  ocean,  and  inland  waterway  transportation.  Nor  is  this 
all.  He  was  a  leading  member  of  the  Isthmian  Canal  Commission 
that,  through  its  thorough  investigation  and  wise  selection,  gave  to 
this  country  and  to  the  world  that  crowning  achievement  of  modern 
times — the  Panama  Canal.  Hence  it  is  my  pleasure  to  present  to 
you  Professor  Emory  Richard  Johnson  of  the  University  of  Penn- 
sylvania.    (Applause.) 

Professor  Johnson:  Mr.  Chairman,  Members  of  the  Na- 
tional Business  Congress:  I  wish  first  to  express  my  appreciation 
of  the  honor  you  confer  upon  me  by  inviting  me  to  be  your  guest 
this  evening.  I  esteem  it  an  honor,  because  I  feel,  as  the  Chairman 
has  just  stated,  that  if  this  country  is  to  solve,  really  solve,  the  busi- 
ness questions  which  confront  Congress  and  the  States  at  the  pres- 
ent time,  it  must  be  by  deliberation  of  men  whose  daily  life  gives 
them  an  intimate  knowledge  of  the  problems  to  be  considered.     I 


NATIONAL     BUSINESS     CONGRESS  269 

have  been  presented  to  you  as  a  University  man,  and  I  plead  guilty 
to  the  accusation;  indeed,  I  am  proud  of  the  fact  that  I  am  con- 
nected with  one  of  the  universities  of  this  country,  but  I  do  not 
appear  before  you  tonight  as  a  University  man,  but  rather  as  a 
student  with  you  of  a  very  practical  question,  a  question  which  I 
have  sought  to  approach  in  no  academic  spirit,  but  in  a  spirit  of 
truth-seeking,  a  spirit  of  attempting  to  arrive  at  an  intimate  knowl- 
edge of  the  problem. 

The  Chairman  has  been  kind  enough  to  refer  to  the  fact  that 
I  have  been  called  upon  by  the  Government  from  time  to  time  to 
investigate  and  report.  Such  persons  are  usually  harmless,  and  I 
assure  you  that  my  work  for  the  Government  has  done  business 
no  injury,  but  at  least  it  has  done  me  good  in  that  I  have  been 
thrown  into  close  personal  contact  not  only  with  professional  men  in 
engineering,  men  in  the  army  and  navy,  but  what  I  prize  most  of 
all,  men  in  active  business  life. 

\\'ithout  asking  permission  of  your  Chairman,  I  stole  away 
from  the  meeting  this  morning  in  order  that  I  might  confer  with 
the  administrative  heads  of  two  of  the  leading  commercial  organ- 
izations other  than  the  Business  League,  of  the  City  of  Chicago,  and 
I  shall  return  to  Washington  on  Friday  morning  feeling  that  I  have 
learned  a  great  deal  from  what  was  told  to  me  this  morning  by  the 
men  who  were  intimately  concerned  with  the  organization  and  de- 
velopment of  the  business  in  this  great  country,  between  the  Alle- 
ghenies  and  the  Rocky  ^Mountains. 

I  have,  however,  been  asked  to  speak  upon  a  very  concrete 
question,  that  of  the  "MEASURES  FOR  THE  PROMOTION 
OF  THE  AMERICAN  MERCHANT  MARINE." 

For  fifty  years  the  American  marine  engaged  in  the  foreign 
trade  has  almost  continuously  declined.  On  the  Great  Lakes  and 
along  the  seaboard,  where  only  ships  built  and  owned  in  this  country 
may  be  employed,  there  is  a  prosperous  fleet  of  six  and  a  half  mil- 
lion tons  of  high-class  shipping;  but  on  the  high  seas  where  foreign 
competition  must  be  met  our  marine  has  not  been  able  to  hold  its 
own. 

It  is  not  necessary  to  rehearse  the  causes  that  have  brought 
this  about.  It  is  generally  agreed  that  the  causes  are  primarily 
economic — that  it  costs  more  to  build  ships  in  the  United  States 
than  in  Great  Britain  or  Germany;  that  operating  expenses  are 
greater  under  the  American  than  under  a  foreign  flag;  and  that, 


270  NATIONAL     BUSINESS     CONGRESS 

such  being  the  case,  American  capital  seeks  investment  on  the  land 
rather  than  on  the  sea.  These  are  obstinate  facts,  and  all  the  more 
unpleasant  to  face  for  the  reason  that  there  seems  to  be  no  imme- 
diate prospect  of  their  changing. 

If  the  hindrances  to  the  increase  of  our  over-sea  fleet  were 
mainly  political  or  legislative  we  might  hope  to  remove  them 
promptly,  and,  by  wise  aid,  to  offset  the  minor  handicaps  of  an 
economic  character.  Germany  has  shown  this  to  be  possible,  and 
her  deep-sea  fleet  is  steadily  increasing  in  spite  of  the  fact  that 
British  builders  and  carriers  have  some  economic  advantages  over 
the  German. 

In  part,  the  handicap  upon  our  registered  marine  is  due  to  laws 
that  can  be  changed  whenever  public  sentiment  favors  such  action, 
and,  I  believe,  the  government  can  render  some  effective  assistance 
in  building  up  the  merchant  marine.  The  purpose  of  this  address  is 
to  consider  briefly  what  legislation  is,  and  what  is  not,  desirable 
in  the  interest  of  our  registered  shipping. 

The  first  thing  to  be  done  is  to  enable  an  American  company 
to  secure  a  ship  as  cheaply  for  operation  under  the  American  flag 
as  under  a  foreign  ensign.  Our  present  registry  laws  make  this 
impossible,  and  should  be  so  changed  as  to  allow  Americans  to 
purchase  foreign-built  ships  for  operation  under  our  flag  in  the 
foreign  trade.  As  long  as  ships  can  be  secured  for  registration 
under  a  foreign  flag  for  a  third  less  than  they  can  be  obtained  for 
operation  under  the  American  flag,  it  is  idle  to  hope  for  any  large 
increase  in  our  international  mercantile  marine.  That  this  is  fact, 
not  theory,  is  fully  proven  by  our  actual  experience. 

The  Commissioner  of  Navigation  states  in  his  current  report 
that  "the  registry  law  has  not  compelled  American  capital  to  stay 
at  home  and  directed  its  investment  in  the  products  of  American 
shipyards.  Yet,"  as  he  says,  "unless  the  law  can  accomplish  such 
an  economic  miracle,  it  can  be  of  no  benefit  to  shipbuilders,  who 
have  been  disposed  to  regard  it  as  essential  to  their  existence." 
After  a  survey  of  the  shipping  built  in  the  United  States  during 
recent  years  for  the  foreign  trade,  the  Commissioner  declares  that 
"the  sole  product  of  the  last  ten  years'  operation  of  the  registry  law 
is  the  Minnesota,  built  in  a  shipyard  specially  prepared  for  the 
purpose,  which  has  built  no  other  steamer  since."  The  Commis- 
sioner is  entirely  correct  when  he  says  that  "a  law  which  shows 


NATIONAL    BUSINESS     CONGRESS  271 

such  meager  results  cannot  stand  the  test  of  frank  discussion,"  and 
that  "if  it  were  merely  nugatory  it  might  remain  undisturbed." 

The  effect  of  the  registry  law  is  not  merely  negative ;  it  has 
restrained  the  increase  of  registered  shipping  in  a  very  positive 
manner.  Within  a  year  it  has  prevented  the  American  owners  of 
a  fleet  of  eighteen  up-to-date  steamships  from  transferring  the  ships 
from  foreign  to  American  registry.  This  fleet  is  operated  in  the 
trade  between  the  United  States  and  the  West  Indies  and  the  coun- 
tries about  the  Caribbean,  where,  for  political  as  well  as  economic 
reasons,  the  flag  of  the  United  States  ought  to  occupy  a  place  as 
prominent  in  commercial  as  in  naval  shipping. 

There  is  every  reason  to  believe  that  the  American  shipyards 
would  benefit  rather  than  suffer  by  the  repeal  of  the  present  law 
prohibiting  Americans  from  purchasing  ships  abroad  for  registry 
under  the  American  flag  for  operation  in  the  foreign  trade.  An- 
other change  in  our  laws,  although  of  minor  consequence,  might 
be  of  some  assistance  to  American-built  ships.  At  the  present  time 
materials  for  the  construction  of  steamships  may  be  imported  into 
the  United  States  free  of  duty,  but  vessels  built  from  imported 
materials  cannot  be  employed  in  the  coastwise  trade  of  the  United 
States  for  more  than  six  months  in  the  year.  This  limitation  upon 
the  use  of  a  vessel  must  influence  men  investing  money  in  ships  to 
forego  the  privilege  of  engaging  both  in  the  coastwise  and  the  for- 
eign trade,  and  to  cause  capitalists  to  purchase  their  vessels  abroad, 
register  them  under  a  foreign  flag  and  to  operate  them  solely  in 
the  foreign  commerce  of  the  United  States.  Our  laws  should  en- 
able shipbuilders  to  construct,  without  restriction,  vessels  for  the 
coastwise,  as  well  as  the  foreign  trade,  with  materials  secured  in 
the  cheapest  markets  of  the  world. 

The  opposition  to  ship  subsidies  in  the  United  States  is  deep- 
seated.  There  has  never  been  any  prospect  that  Congress  would 
grant  general  navigation  and  construction  bounties  such  as  have 
been  given  by  France  and  some  other  countries.  Indeed,  the  feeling 
against  special  aid  to  the  merchant  marine  is  so  strong  that  it  has 
thus  far  been  impossible  to  modify  the  existing  mail  payment  act 
of  1891  in  such  a  manner  as  to  render  it  of  real  aid  to  our  merchant 
fleet.  I  believe,  however,  that  continued  effort  should  be  made  to 
convince  the  American  people  that  it  will  be  wise  for  them  to  adopt 
towards  their  merchant  marine  in  the  foreign  trade,  the  policy  that 
has  long  been  successfully  adhered  to  by  Great  Britain  and  that 


272  NATIONAL     BUSINESS     CONGRESS 

Germany  has  found  to  be  effective  in  the  promotion  of  her  maritime 
interests. 

The  fundamental  weakness  of  the  mail  payment  act  of  1891 
as  an  agency  for  the  promotion  of  our  carrying  trade  on  the  seas 
is  that  it  was  enacted  mainly  to  enable  the  people  of  the  United 
States  to  maintain  high-speed  express  steamers  on  the  North  At- 
lantic in  competition  with  the  British  and  German  lines  engaged  in 
the  transportation  of  passengers  and  express.  Our  foreign  com- 
merce is  amply  provided  with  transportation  facilities  on  the  North 
Atlantic.  The  competition  among  steamship  lines  there  is  keener 
than  in  any  other  part  of  the  world.  The  maintenance  of  a  fast 
express  steamship  line  on  the  North  Atlantic  under  the  American 
flag,  for  some  time  at  least,  will  require  very  great  assistance  from 
the  government,  and  the  benefits  to  our  commerce  will  be  relatively 
slight.  It  may  be  well  to  continue  to  support  one  high-speed  trans- 
Atlantic  line,  but  the  act  of  1891  should  be  so  modified  as  to  enable 
the  Postmaster  General  to  bring  into  existence  and  to  build  up  lines 
consisting  of  vessels  of  moderate  speed,  carrying  freight  and  pas- 
sengers from  the  United  States  to  South  America  and  Asia. 

I  do  not  advocate  the  immediate  adoption  of  an  elaborate  pro- 
gram; indeed,  I  would  have  the  act  of  1891  modified  with  a  view 
to  giving  strong  government  support  only  (a)  to  a  line  from  the 
Atlantic  seaboard  down  the  east  coast  of  South  America  as  far  as 
Buenos  Ayres;  (b)  to  a  line  from  our  Atlantic  and  Gulf  ports 
down  the  west  coast  of  South  America  to  Valparaiso;  and  (c)  to  a 
line  from  our  west  coast  ports  to  Hawaii,  Japan  and  the  Philippines. 

The  fact  should  be  recognized  by  the  government  that  these 
three  lines  must  secure  most  of  their  earnings  from  the  transporta- 
tion of  freight,  and  that  the  vessels  must  be  so  constructed  and  so 
operated  as  to  transport  freight  profitably.  Their  speed  must  be 
moderate.  In  the  case  of  the  two  South  American  lines  the  maxi- 
mum payment  under  the  modified  act  of  1891  ought  to  be  given  to 
vessels  with  a  rating  of  13  or  14  knots  and  an  actual  average  re- 
quired speed  at  sea  of  not  more  than  12  knots.  This  may  seem  to 
be  providing  for  the  transportation  of  mails  at  a  slow  speed,  but  it 
should  be  remembered  that  freight  cannot  be  economically  trans- 
ported in  American  vessels  in  competition  with  foreign  shipping  at 
a  higher  rate  of  speed  than  12  knots.  It  should  also  be  borne  in 
mind  that  the  German  Government  requires  a  speed  of  only  12  to 
14  knots  of  the  lines  to  which  it  gives  most  of  its  subsidy — those 


NATIONAL     BUSINESS     CONGRESS  273 

through  the  Suez  Canal  to  China  and  to  Africa.  Such  a  small 
percentage  of  the  total  earnings  of  lines  from  the  United  States 
to  the  east  and  west  coasts  of  South  America  will  be  secured  from 
the  passenger  and  mail  services  that  even  liberal  payments  for  the 
transportation  of  the  mails  may  be  entirely  offset  by  a  requirement 
that  the  vessels  shall  be  operated  at  a  speed  of  even  15  or  16  knots 
per  hour. 

The  lines  across  the  Pacific  might  have  enough  passenger  and 
express  traffic  to  enable  vessels  to  be  operated  profitably  at  an  aver- 
age speed  at  sea  of  14  knots.  The  mail  contract  with  the  trans- 
Pacific  line  might  stipulate  a  theoretical  speed  of  15  or  16  knots.  It 
will  hardiv  be  possible  for  vessels  with  a  higher  rating  to  maintain, 
under  the  American  flag,  profitable  services  in  competition  with 
ships  under  the  Japanese  and  British  flags. 

In  providing  public  aid  for  the  American  marine  it  will  hardly 
be  necessary  to  subsidize  any  portion  of  the  coastwise  fleet.  For- 
eign vessels  are  not  allowed  to  engage  in  the  trade  between  the  ports 
of  the  United  States,  and,  thus  entirely  freed  from  foreign  com- 
petition, our  coastwise  fleet  has  increased  rapidly  in  tonnage  and 
efificiency.  In  1900  the  enrolled  tonnage  on  the  Atlantic  and  Pacific 
coasts  amounted  to  2,216,516  tons;  in  1910  the  tonnage  had  risen  to 
3,540.519  tons,  a  gain  of  nearly  60  per  cent  during  the  decade.  The 
opening  of  the  Panama  Canal  will  give  much  larger  opportunity 
for  the  development  of  the  coastwise  shipping.  The  demand  for 
transportation  by  water  from  coast  to  coast  will  be  much  greater 
than  at  the  present  time,  and  it  may  be  confidently  expected  that 
shipping  will  be  brought  into  service  in  response  to  and  in  propor- 
tion to  commercial  demar>ds. 

Fears  have  been  expressed  that  the  carriers  engaged  in  the 
coastwise  trade  between  the  two  seaboards  may  experience  difficulty 
in  competing  with  the  transcontinental  railroads.  On  the  other 
hand,  there  is  equally  strong  apprehension  on  the  part  of  the  rail- 
roads that  a  large  share  of  the  traflic  between  the  eastern  and  west- 
ern parts  of  the  United  States  will  after  the  opening  of  the  Canal. 
be  handled  coastwise. 

My  own  judgment  is  that  the  water  lines  will  undoubtedly  be 
able  to  compete  successfully  with  the  railroads  and  that  the  volume 
of  business  moving  coastwise  will  be  large.  At  the  same  time,  I 
do  not  apprehend  that  the  Canal  will  prove  to  be  an  injury  to  the 
transcontinental  railroads  or  that  it  will  handicap  their  development. 


274  NATIONAL     BUSINESS     CONGRESS 

The  Canal  will  undoubtedly  compel  some  readjustment  of  rail  rates 
to  and  from  the  Pacific  coast  terminals.  It  will  also  draw  to  the 
Atlantic  seaboard  some  trafific  from  west  of  the  Allegheny  Moun- 
tains that  now  moves  directly  by  rail  to  the  Pacific.  The  railroads 
will,  of  course,  find  it  necessary  to  divide  with  the  steamship  lines 
some  part  of  their  coast-to-coast  traffic ;  but  it  may  easily  transpire 
that  what  the  railroads  may  lose  in  traffic  will  be  more  than  offset 
by  what  they  gain  in  freight  and  passenger  business  as  the  result 
of  the  industrial  and  commercial  development  which  the  Canal  will 
bring  about.  The  effect  of  the  Canal  will  be  to  increase  the  traffic 
handled  from  coast  to  coast  and  also  to  develop  the  industries  of 
both  the  seaboard  States  and  of  the  wide  mountain  territory  crossed 
by  the  transcontinental  railway  lines.  It  is  this  broad  intermountain 
territory  that  now  supplies  the  transcontinental  railroads  with  the 
major  share  of  their  tonnage  and  profits.  If  the  Canal  succeeds  in 
promoting  the  industries  both  of  the  seaboard  and  intermountain 
States,  in  other  words,  if  the  Canal  really  secures  a  large  traffic, 
the  railroads  are  certain  to  be  the  ultimate  gainers.  Personally,  I 
believe  they  will  not  be  losers,  even  during  the  early  years  of  the 
operation  of  the  Canal. 

The  Canal  will  supplement  the  railroads  not  only  by  developing 
the  industries  of  the  West,  but  also  in  a  more  direct  manner.  I 
assume  that  the  leading  transcontinental  railroads  from  the  Grand 
Trunk  and  Pacific  on  the  north  to  the  Southern  Pacific  on  the  south 
will,  unless  prevented  by  discriminating  canal  tolls  or  other  re- 
straining legislation,  establish  strong  steamship  lines  through  the 
Canal — lines  that  will  supplement  the  services  of  the  railroads  as 
do  the  present  lines  on  the  Great  Lakes  and  upon  the  Pacific. 

It  being  certain  that  the  railroads  will  establish  coast-to-coast 
steamship  lines,  unless  prevented  from  doing  so,  there  are  those 
who  fear  that  it  will  be  impossible  for  lines  independent  of  railway 
ownership  or  control  to  compete  successfully  with  the  steamship 
lines  having  railroad  affiliations.  Accordingly,  it  has  been  sug- 
gested that  the  Government  should  either  prevent  the  railroads 
from  operating  steamship  lines  or  should  make  the  Panama  Canal 
tolls  so  high  for  railroad  lines  as  to  prevent  them  from  being  oper- 
ated. If  the  railroads  are  not  allowed  to  operate  steamship  lines 
through  the  Canal,  the  commercial  usefulness  of  that  great  water- 
way may  be  limited;  whereas,  it  will  be  agreed  that  the  policy  of 


NATIONAL     BUSINESS     CONGRESS  275 

the  United  States  should  be  to  make  the  Canal  of  maximum  service 
to  the  commerce  of  the  United  States  and  to  the  world  at  large. 

If  it  be  feared  that  the  steamship  lines  under  railroad  control 
or  with  railroad  affiliations  may  engage  in  destructive  warfare 
against  the  independent  lines,  the  measures  to  be  adopted  are  those 
that  will  so  regulate  coastwise  carriers  as  to  maintain  fair  competi- 
tion among  all  lines.  Protection  can  be  afiforded  to  independent 
lines  by  federal  regulation  of  services  and  rates  of  coast-to-coast 
shipping.  ]Moreover,  the  regulation  can  be  so  enforced  as  to  pro- 
mote rather  than  to  restrict  the  use  of  the  Canal.  In  our  zeal  to 
adopt  measures  that  will  prevent  the  railroads  from  throttling  the 
Canal,  we  ought  not  to  limit  the  use  of  the  waterway.  Regulation 
rather  than  limitation  is  desirable. 

While  it  seems  necessary  and  desirable  to  give  government  aid 
to  the  American  marine  engaged  in  the  foreign  trade,  I  am  not  over- 
sanguine  as  to  any  large  growth  in  our  registered  shipping  in  the 
near  future.  The  economic  disadvantages  of  the  American  marine 
as  compared  with  those  under  foreign  flags  are  serious  and  cannot 
be  outgrown  in  a  day ;  nevertheless,  I  believe  that  with  wise  govern- 
ment support,  steady,  if  not  rapid,  progress  can  be  made  in  building 
up  our  deep-sea  tonnage.  Certainly,  earnest  and  practical  effort 
should  be  made  to  strengthen  the  x^merican  marine  in  the  inter- 
national trade. 

The  logical  method  of  aiding  our  merchant  marine  in  the  for- 
eign trade  is,  first,  to  admit  to  American  register  for  that  trade 
vessels  built  abroad  and  owned  by  American  citizens ;  and,  second, 
to  give  effective  government  support  to  three  lines  of  freight  and 
passenger  steamers  of  moderate  speed,  one  to  the  east  coast  and  an- 
other to  the  west  coast  of  South  America,  and  a  third  across  the 
Pacific. 

I  trust  that  measures  may  be  taken  by  Congress  at  an  early 
date  to  remove  the  present  legislative  handicap  upon  the  American 
merchant  marine  in  the  foreign  trade,  and  that  the  act  of  1891  may 
be  so  amended  as  to  enable  the  Government  to  make  it  a  means  of 
aiding  our  over-sea  carrying  trade.  The  opening  of  the  Panama 
Canal  should  be  preceded  by  measures  that  will  foster  the  develop- 
ment of  the  American  merchant  marine.     (Applause.) 


276  NATIONAL     BUSINESS     CONGRESS 


THE  PANAMA  CANAL  AND  THE  COMMER- 
CIAL AND  TRANSPORTATION 
INTERESTS. 

By  Emory  R.  Johnson, 

Professor  of  Transportation  and  Commerce,  University  of  Pennsylvania. 


(From  the  Nezv  York  Journal  of  Commerce  Bulletin  of  January  3, 
1912.     Reprinted  as  kindred  to  Professor  Johnson's  Address.) 

The  Panama  Canal,  now  within  two  years  of  completion,  is 
being  constructed  to  aid  the  industry  and  commerce  of  the  United 
States  and  to  increase  the  effective  strength  of  the  American  navy. 
The  effect  whicli  the  canal  will  actually  have  upon  the  industrial 
and  commercial  development  of  the  United  States,  as  a  whole,  is  not 
easy  to  determine;  indeed,  careful  analysis  can  only  indicate  the 
more  important  changes  to  be  expected. 

The  most  general  influence  of  the  Panama  Canal  upon  Amer- 
ican trade  will  result  from  increasing  transportation  facilities.  A 
fact  of  fundamental  importance,  and  one  often  overlooked,  is  that 
the  development  of  industry  and  commerce  depends  more  upon  the 
completeness  of  the  transportation  service  than  upon  the  cheapness 
of  freight  rates.  The  absolute  cost  of  transportation  today  is  so 
small  as  to  impose  but  a  slight  restraint  upon  trade,  but  facilities 
which  aid  new  transportation  services  often  make  possible  a  large 
expansion  of  commerce. 

The  steaming  time  between  New  York  and  San  Fransico  (in- 
cluding a  half  day  for  passing  the  Canal  and  another  half  day  for 
coaling  at  the  Isthmus)  will  be  about  23  days  for  10-knot  ships  and 
19  days  for  12-knot  vessels.  The  present  time  taken  by  the  rail- 
roads for  moving  carload  freight  from  the  Atlantic  to  the  Pacific 
seaboard  is  about  three  weeks ;  thus  freight  vessels  will  have  ap- 
proximately the  same  schedule  as  freight  cars.  Fifteen-knot  ves- 
sels will  make  the  run  between  New  York  and  San  Francisco  in 
15  or  16  days,  including  a  day  for  detention  and  coaling  at  the 
Isthmus.  Vessels  with  a  speed  of  15  knots  are  of  the  passenger 
rather  than  the  freight  class,  and  will  probably  not  be  operated  in 
large  numbers.  The  only  considerable  passenger  traffic  between 
the  two  seaboards  will  consist  of  immigrants  west-bound  and  of 
excursionists  in  both  directions.     The  Panama  Canal  is  to  be  re- 


NATIONAL     BUSINESS     CONGRESS  277 

garded  as  a  coastwise  highway  for  freight  rather  than  for  passen- 
gers. 

The  opening  of  the  Panama  Canal  will  change  the  conditions 
of  industrial  competition,  and  the  benefits  will  not  all  be  secured  by 
the  United  States.  Half  of  the  traffic  passing  the  Canal,  at  least 
during  the  first  decade  of  its  operation,  will  not  touch  the  shores 
of  the  United  States  at  all — it  will  be  the  commerce  of  Europe 
with  western  South  x\merica.  and,  to  some  extent,  with  other  sec- 
tions of  the  Pacific.  While  the  United  States  will  trade  with  for- 
eign Pacific  countries  under  more  favorable  conditions  than  exist 
at  present,  the  same  will  be  true  of  Europe,  which  now  has  a  long 
lead  over  the  United  States  in  the  trade  of  most  sections  of  the 
Pacific.  The  Canal  will  enlarge  our  trade  with  Western  South 
America,  but  Europe  will  also  expand  her  commerce  with  that 
region. 

The  competition  between  Europe  and  the  eastern  part  of  the 
United  States  for  the  trade  of  our  Pacific  Coast  States  will  be 
keen.  Great  Britain,  Germany  and  other  European  countries  wall 
have  especially  low  freight  rates  to  the  west  coast  of  North  Amer- 
ica, because  the  larger  volume  of  traffic  moves  east-bound.  Vessels 
from  Europe  to  our  west  coast  will  be  as  eager  as  they  now  are  to 
secure  cargo  at  low  rates  to  prevent  movements  in  ballast.  The 
United  States  Steel  Corporation  and  other  American  producers 
will  be  obliged  to  sell  their  products  in  the  western  part  of  the 
United  States  in  constant  competition  with  the  British.  German  and 
Belgian  manufacturers.  The  tarift"  will  aid  the  Steel  Corporation, 
but  even  present  tariff  rates  are  not  high  enough  to  prevent  foreign 
producers,  assisted  by  low  ocean  rates,  from  selling  profitably  in 
our  West  Coast  markets. 

Competition  between  the  industries  in  Eastern  Seaboard  States 
and  those  in  the  States  of  the  Mississippi  A'alley  will  be  accentuated 
by  the  Canal.  The  testimony  presented  to  the  Interstate  Commerce 
Commission  in  the  intermountain  rate  cases  showed  that  about 
20  per  cent  of  the  west-bound  traffic  of  the  transcontinental  rail- 
roads originated  in  the  territory  east  of  the  Buffalo-Pittsburg  dis- 
trict, that  about  23  per  cent  came  from  the  Buffalo-Pittsburg  dis- 
trict, and  57  per  cent,  more  than  one-half,  from  the  Middle  West. 
Eor  some  years  there  has  been  a  steady  westward  movement  of 
industry  from  the  Atlantic  Seaboard  to  the  States  west  of  the 
Allegheny  Mountains ;  and  not  a  few  producers  in  the  valleys  of  the 


278  NATIONAL     BUSINESS     CONGRESS 

Ohio,  Mississippi  and  Missouri  rivers  are  apprehensive  lest  the 
Panama  Canal  may  check  this  westward  movement  of  industry  and 
enable  the  Seaboard  States  to  secure  a  larger  percentage  of  the 
trade  in  the  markets  of  the  West  Coast.  The  transcontinental  rail- 
roads share  this  apprehension.  To  what  extent  the  Panama  Canal 
will  draw  industry  back  to  the  Atlantic  Seaboard  cannot  be  pre- 
dicted in  advance  of  the  opening  of  the  Canal ;  but  it  is  probably 
safe  to  assume  that  the  producers  and  carriers  of  the  Middle  West 
will  find  some  effective  method  of  dealing  with  the  situation  that 
may  develop. 

The  influence  which  the  Canal  may  exert  upon  the  development 
of  the  Rocky  Mountain  States  is  deservedly  receiving  much  atten- 
tion. During  recent  years  the  rivalry  between  the  cities  of  the  In- 
termountain  States  and  those  of  the  Pacific  coast  to  become  domi- 
nant centers  of  industry  and  trade  has  grown  stronger.  It  is  the 
hope  of  the  seaboard  cities  that  the  Canal  may  aid  them  in  retaining 
their  present  commercial  supremacy. 

The  present  system  of  transcontinental  rail  rates  will  assist 
the  Pacific  coast  terminals  in  retaining  the  distributive  trade  of  the 
West,  and  the  future  growth  of  the  intermountain  cities  will  be 
largely  influenced  by  the  interpretation  which  the  Supreme  Court 
may  put  upon  the  long-and-short-haul  section  of  the  Interstate 
Commerce  Act.  If  the  decision  of  the  Interstate  Commerce  Com- 
mission establishing  a  percentage  relationship  between  the  rail  rates 
to  the  seaboard  and  to  intermediate  points  shall  prevail,  the  Canal 
will  be  of  greater  assistance  to  the  industrial  development  of  the 
Mountain  States  than  it  will  be  if  the  present  system  of  rail  rates 
shall  be  allowed  to  stand. 

Railroad  officials  in  all  parts  of  the  United  States  are  consider- 
ing the  probable  effects  of  the  Canal  upon  through  traffic  and  rates. 
Of  course,  everybody  realizes  that  most  of  the  traffic  handled  coast- 
wise through  the  Canal  will  be  transported  twice  by  rail  and  that 
the  local  traffic  of  the  railroads  within  five  hundred  miles  of  each  of 
the  two  seaboards  must  be  increased  by  the  Panama  Canal.  As  the 
railroads  must  collect  and  distribute  most  Canal  traffic,  they  must 
gain  rather  than  lose,  if  the  Canal  is  a  success. 

The  growth  in  the  volume  of  through  rail  traffic  between  the 
two  seaboards  and  between  the  Mississippi  \^alley  and  the  west 
coast  may  be  temporarily  slackened  by  the  Panama  Canal,  but  even 
this  is  not  certain.     It  is  impossible  to  determine  in  advance  the 


NATIONAL     BUSINESS     CONGRESS  279 

extent  to  which  the  character  of  the  service  performed  by  the  rail- 
roads will  enable  them  to  hold  traffic  in  competition  with  the  coast- 
wise steamships  which  can  and  will  handle  traffic  at  appreciably 
lower  rates.  The  citrus  fruits  from  Southern  California,  for  in- 
stance, will  probably  be  shipped  by  rail,  for  the  most  part,  after 
the  Canal  is  opened,  although  the  faster  steamships  may  be  expected 
to  equip  themselves  with  refrigeration  facilities  in  proportion  to  the 
demand.  Fruit  is  dispatched  from  Los  Angeles  in  trainload  lots 
for  the  eastern  part  of  the  United  States,  and,  after  the  train  is 
dispatched,  the  cars  of  fruit  are  severally  consigned  to  various 
destinations.  Such  being  the  manner  of  conducting  the  business,  it 
is  the  opinion  of  well-informed  transportation  men  that  the  fruit 
markets  east  of  the  Allegheny  Mountains,  at  least,  will  be  supplied 
by  direct  rail  lines  rather  than  by  a  combined  water  and  rail  route. 
It  is  probable  also  that  the  shippers  of  many  commodities  may 
prefer  all-rail  services  directly  from  the  producer's  factory  to  the 
consignee's  store  or  warehouse,  without  transfer  of  freight  in 
transit,  to  the  less  expensive  service  involving  transportation  by  two 
railroads  and  a  steamship  line,  with  the  necessary  rehandling  of 
goods  en  route. 

It  is  not  to  be  expected  that  the  Canal  will  bring  about  the 
general  reconstruction  of  transcontinental  railroad  rates.  The  rail 
rate  structures  will  be  maintained  after  the  Canal  is  opened  and 
railway  officials  will  wait  to  see  how  traffic  moves.  If  they  find 
that  the  Canal  route  is  getting  a  large  share  of  the  through  business, 
some  readjustment  of  through  rail  rates  will  necessarily  be  made. 
The  extent  to  which  the  transcontinental  rate  structures  will  be 
modified  will  depend  upon  the  Supreme  Court's  interpretation  of 
the  fourth  section  of  the  Interstate  Commerce  Act.  There  w^ill  be 
no  general  rate  warfare  started  by  the  railroads  against  the  steam- 
ship lines ;  the  railroads  will  have  too  much  at  stake ;  warfare  will 
be  too  costly.  It  is  much  more  probable  that  several  of  the  trans- 
continental railroad  systems  will  do  what  the  Southern  Pacific  is 
certain  to  do,  that  is,  establish  steamship  lines  between  the  two  sea- 
boards. 

The  steamship  lines  operated  through  the  Canal  by  the  rail- 
roads may  be  expected  to  carry  traffic  at  profitable  rates,  and  to 
supplement  the  services  of  all-rail  lines.  It  will  be  in  the  public  in- 
terest to  permit  the  railroads  to  establish  as  many  steamship  lines 
as  they  may  wish  to  operate  from  coast  to  coast.     If  it  should  be 


280  NATIONAL     BUSINESS     CONGRESS 

necessary  to  regulate  the  services  of  the  coastwise  carriers,  in  or- 
der to  maintain  fair  competition  between  railway  and  independent 
coastwise  lines,  the  jurisdiction  of  the  Interstate  Commerce  Com- 
mission may  readily  be  extended  over  carriers  by  water  between  the 
two  seaboards  of  the  United  States. 

The  coastwise  steamship  interests  are  eagerly  awaiting  the 
fixing  of  Panama  Canal  tolls.  It  is  assumed  that  the  payment  by 
the  Government  of  the  tolls  upon  American  ships  will  be  of  signal 
assistance  to  the  coastwise  shipping.  As  a  matter  of  fact.  Panama 
Canal  tolls  will  hardly  be  burdensome  to  shipping.  They  will  add 
possibly  5  per  cent  to  the  average  freight  rates  between  the  two 
seaboards  of  the  United  States.  Likewise,  the  hope  of  the  trans- 
continental railroads  that  the  Canal  tolls  will  assist  them  in  com- 
peting against  the  coastwise  steamship  lines  can  hardly  be  realized. 
An  addition  of  5  per  cent  to  the  rates  charged  by  coastwise  carriers 
can  be  of  but  slight  help  to  the  railroads.  The  division  of  the 
traffic  between  rail  and  water  lines  will  not  be  largely  afifected  by 
such  tolls  as  the  United  States  Government  will  probably  charge  for 
the  use  of  the  Panama  Canal. 

The  Toastmaster:  I  could  not  introduce  to  you,  gentlemen, 
the  next  speaker,  that  is,  particularly  to  our  Chicago  friends,  be- 
cause he  is  known  to  every  man,  woman  and  child  in  Chicago.  To 
those  who  do  not  live  in  Chicago,  and  who  read,  I  am  sure  they 
have  all  heard  of  George  M.  Reynolds.  I  said  I  could  not  introduce 
him;  I  present  him.     (Applause.) 


PRESSING    NEEDS   FOR  CURRENCY  LEGIS- 
LATION. 


Address  by  Mr.  George  M.  Reynolds, 

President  of  the  Continental  and  Commercial  National  Bank  of  Chicago. 


Mr.  Reynolds  :  Mr.  President  and  Gentlemen — Enveloped 
as  we  are  in  an  atmosphere  of  conviviality  and  good  cheer, 
it  seems  almost  a  crime  to  inject  into  this  meeting  a  question 
so  serious  and  so  dry  as  the  discussion  of  the  financial  question. 
Notwithstanding  the  conviviality  of  the  evening,  I  am  glad  to  note 
that  none  of  us  seems  to  be  in  the  condition  of  the  man  who,  having 
been  invited  to  a  function,  went  early,  met  all  the  guests,  had  a 


NATIONAL     BUSINESS     CONGRESS  281 


little  visit  with  them,  and  in  a  short  time  went  from  one  end  of 
the  room  to  the  other  shaking  hands,  bidding  them  good-bye.  A 
friend  met  him  and  said:  "John,  you  surely  are  not  going  home 
now?  The  frivolities  are  just  going  to  begin."  "No,"  John  re- 
plied, "I  am  not  going  home  now,  but  I  want  to  bid  you  all  good-bye 
while  I  know  you."     (Laughter.) 

Speaking  of  conviviality,  reminds  me  of  the  crowd  of  gentle- 
men who,  after  having  left  a  gathering  of  this  kind,  and  were  on 
their  way  home,  assembled  in  front  of  a  house  and  delegated  one 
man  to  go  to  the  door  and  ring  the  door  bell.  After  a  considerable 
wait  a  lady's  head  appeared  at  the  second  story  window,  and  one 
gentleman  said:  "Are  you  Mrs.  Smith?"  She  says:  "I  am."  He 
says:  "Please,  come  down  and  pick  out  Mr.  Smith;  the  rest  of  us 
want  to  go  home."     (Laughter.) 

Now.  gentlemen,  when  I  look  into  the  faces  of  this  distin- 
guished gathering  and  recognize  so  many  men  who  have  been  so 
conspicuously  successful  in  various  lines  of  business,  I  am  ex- 
tremely diffident  to  undertake  to  discuss  with  you  this  question  of 
currency  legislation,  or  the  need  of  it,  for  the  reason  that  I  know  at 
the  very  outset  I  shall  not  be  able  to  say  much  that  will  either  in- 
struct or  entertain  you.  About  the  only  apology  I  can  offer  for 
appearing  before  you  at  this  time  is  the  obsequious  manner  in  which 
the  Committee  of  the  National  Business  League  of  America  called 
upon  me.  when  they  extended  this  invitation  to  me  to  be  present 
to-night.  They  came  into  my  office  with  soft  step,  with  heads 
bowed  low,  and  with  an  obsequious  demeanor  talked  so  pleasantly 
that  when  I  reflected  that  the  occasion  was  so  long  in  the  future 
I  was  induced  to  accept  the  invitation,  feeling  that  I  would  have 
ample  time  in  which  to  properly  prepare  myself  to  discuss  the 
subject  before  this  distinguished  body  gathered  here  to-night.  Up 
until  noon  to-day  I  was  still  convinced  that  I  would  have  an  oppor- 
tunity to  make  that  preparation,  and  I  confidently  expected  to 
leave  my  office  at  12  o'clock  to-day  and  spend  the  rest  of  the  time 
in  the  seclusion  of  my  own  room  preparing  myself,  but  as  usual 
some  unexpected  things  happened  and  I  did  just  get  home  in  time 
to  change  my  clothes  before  coming  here;  so  I  appear  before  you 
to-night  with  not  even  a  suspicion  of  a  prepared  thesis,  but  rather 
to  discuss  in  a  conversational  way  a  question  w^hich  seems  to  be 
of  vital  importance  to  the  business  interests  of  this  country.  In- 
deed, I  think  the  financial  question  is  the  most  important  question 


282  NATIONAL     BUSINESS     CONGRESS 

engaging  the  attention  of  the  people  of  this  country  at  the  present 
time. 

It  seems  to  me  so  much  has  been  said  upon  the  necessity  of 
currency  legislation  that  it  would  be  a  waste  of  time  for  me  to 
undertake  to  make  any  reference  at  all  to  the  present  national 
banking  system,  and  I  shall  not  attempt  to  do  so,  but  rather  I  shall 
endeavor  to  bring  to  your  attention  some  of  the  salient  points 
which,  to  my  mind,  should  be  given  consideration  and  which  call  for 
legislation. 

It  would  require  much  more  time  than  that  which  has  been 
placed  at  my  disposal  to-night  in  order  to  make  anything  like  a 
comprehensive  presentation  of  this  subject,  and  I  must,  therefore, 
content  myself  with  presenting,  more  or  less  at  random,  different 
thouglits  that  may  come  to  my  mind  in  connection  with  this  subject. 

I  am  not  here  to  find  fault  with  our  present  national  banking 
system,  notwithstanding  the  fact  that  I  feel  it  is  very  inefficient  in 
many  respects,  for  I  think,  all  things  considered,  it  has  served  us 
fairly  well.  It  was  the  outgrowth  of  conditions  at  the  close  of  the 
war  which  created  a  necessity  for  the  adoption  of  a  banking  system 
on  the  one  hand  and  the  making  of  a  market  for  securities  of  the 
Government  on  the  other  hand.  The  establishment  at  that  time 
of  the  national  banking  system,  in  view  of  the  volume  of  business 
in  this  country,  seems  to  have  been  a  fairly  good  one ;  it  served  a 
double  purpose  and  gave  stability  to  the  values  of  government  se- 
curities. 

The  fact,  however,  that  the  bond  secured  national  bank  note 
is  inelastic  has  been  discussed  so  many  times  and  from  so  many 
points  of  view  that  I  will  not  touch  upon  that-  subject. 

I  want  to  say  that,  in  my  opinion,  the  reason  the  present  na- 
tional banking  law  has  served  the  country  as  well  as  it  has,  with 
no  more  frequent  depressions  and  visitations  of  seasons  of  panics, 
is  due  to  the  growing  use  of  credit  in  business  transactions  in  this 
country.  Indeed,  so  rapid  has  been  the  growth  of  the  use  of  credit 
in  our  business  transactions,  we  are  told  to-day  that  about  96  per 
cent  of  the  business  of  the  country  is  done  upon  credit.  Therefore, 
it  seems  to  me  that  what  means  the  most  for  the  protection  of  the 
business  interests  of  this  country  is  that  which  will  give  the  greatest 
measure  of  protection  to  the  credit  of  the  country ;  and  it  is  my  pur- 
pose, in  the  brief  time  that  I  have  to-night,  to  devote  my  remarks 
almost  entirely  to  that  phase  of  the  necessity  for  currency  legisla- 


NATIONAL    BUSINESS     CONGRESS  283 

tion,  because  I  believe  that  almost  every  man  within  the  sound  of  my 
voice  will  know  something  of,  and  has  to  do  more  or  less  with, 
credits. 

The  fact  that  96  per  cent  of  our  business  is  done  upon  credit 
makes  credit  a  most  vital  force  in  all  business,  as  it  is  one  of  the 
most  important  factors  in  economics,  and  if  that  credit  is  stable, 
it  must  be  protected  by  a  system  of  currency  and  banking  which 
will  enable  us  in  times  of  stress  or  storm  to  exchange  credits  of 
one  form  into  credits  of  another  form.  To  illustrate  this,  I  will  say 
that,  in  the  transactions  of  business  we  have  many  forms  of  credits. 

The  initial  form  of  credit  might  properly  be  said  to  be  one 
created  in  a  transaction  between  two  individuals.  We  will  say 
that  A  and  B  have  a  business  transaction,  the  result  of  which  is 
that  A  gives  to  B  his  note;  B,  in  the  acceptance  of  the  note,  has 
at  the  time  being  no  thought  of  the  necessity  for  the  use  of  that 
credit  in  his  own  business  and  he  is  perfectly  willing  to  accept  it. 
Later  on  a  condition  arises  through  which  B  needs  to  use  the  credit 
which  he  has  taken  from  A.  He  wants  to  use  that  in  another 
transaction  with,  we  will  say,  C.  Inasmuch  as  his  transaction 
with  C  involves  a  different  amount  from  the  one  had  with  A,  and 
furthermore  C  having  no  knowledge  of  the  financial  responsibility 
of  A,  the  only  way  by  which  he  can  use  this  credit  is  to  take  the 
note  of  A  to  the  bank  and  discount  it.  If  he  takes  credit  for  the 
proceeds  of  the  note,  he  may  then  conclude  his  second  transaction 
by  giving  his  check  upon  the  bank,  which  he  does  in  the  usual 
course  of  business.  That  transaction  has  transferred  or  changed 
the  credit  of  A  into  a  different  form  of  credit,  or  a  bank  credit, 
which  is  discharged  through  the  use  of  a  bank  check.  If,  however,  • 
his  transaction  is  to  be  with  someone  to  whom  he  is  unknown  and 
that  person  may  be  uncertain  as  to  whether  or  not  he  has  the  money 
in  the  bank,  he  may  discount  the  note  and  get  a  bill  of  exchange  on 
some  other  point,  transferring  through  this  process  the  credit  of 
A  into  a  still  different  form  of  credit.  As  the  party  receiving  the 
check  from  B,  or  the  bank's  bill  of  exchange,  as  the  case  may  be, 
may  possibly  be  someone  who  intends  to  leave  the  community,  and 
intends  to  go  to  some  remote  section  of  the  country,  where  the 
bank  upon  which  it  may  be  drawn  may  not  be  known,  he  may 
require  a  dififerent  form  of  credit.  In  which  event  he  exchanges 
B's  check  or  the  bank's  bill  of  exchange,  whichever  it  may  be,  into 


284  NATIONAL     BUSINESS     CONGRESS 


still  another  form  of  credit,  ^vhich  is  currency,  and  the  bank  gives 
him  bank  notes. 

Now,  through  these  natural  processes  we  see  the  credit  cre- 
ated in  the  individual  transaction  between  A  and  B  exchanged  into 
and  for  other  forms  of  credit  and  used  in  other  business  trans- 
actions until  it  at  last  reaches  the  stage  of  the  bank  note,  which 
is  generally  known  and  accepted  all  over  the  country,  and,  there- 
fore, is  regarded  as  the  highest  form  of  credit. 

I  contend,  my  friends,  that  a  proper  system  of  banking  is  that 
which  will  give  adequate  protection  to  the  credit  of  this  country. 
A  system  which  will  make  it  possible,  in  the  ordinary  transactions 
of  business,  to  exchange  one  form  of  credit  into  another,  so  that 
if  you  have  A's  note,  or  B's,  or  C  has  B's  check,  or  C  has  the  bank's 
letter  of  credit,  they  all  can  be  exchanged  back  into  one  form  or 
other  of  credit  to  suit  the  convenience  of  the  parties  to  the  trans- 
action. 

Now,  under  our  existing  banking  and  currency  laws,  that  is 
impossible.  The  fact  that  our  national  bank  notes  are  inelastic 
and  that  they  are  secured  by  Government  bonds  makes  it  impossible. 
So  that  a  system  of  banking  and  currency  which  will  give  proper 
protection  to  these  credits  is,  in  my  opinion,  of  pressing  necessity  at 
this  time,  and  it  is  to  urge  the  adoption  of  some  legislation  which 
will  provide  this  facility  in  some  form  or  other  that  I  appear  before 
you  to-night. 

Under  present  conditions  the  amount  of  credit  which  can  be 
extended  in  any  community,  in  the  relations  of  that  community  with 
its  banks,  must  be  measured  entirely  by  the  relationship  between  the 
reserves  in  the  vaults  of  the  banks  and  the  outstanding  credits  of 
those  banks.  It  makes  no  difference  what  the  credit  requirements 
of  your  community  may  be,  you  are  limited  to  only  that  amount  of 
credit  which  is  permitted  by  the  reserve  laws  in  the  maintenance  of 
the  prescribed  relation  of  the  money  in  the  vaults  of  the  banks  and 
the  credits  which  the  banks  have  extended. 

A  bank  in  any  community  is,  therefore,  a  dealer,  not  in  money 
as  is  oftentimes  supposed,  but  in  credits.  Indeed,  it  is  one  of  the 
chief  functions  of  a  bank  in  any  community  to  collect  the  credits 
on  the  one  hand  and  the  debits  on  the  other,  and  offset  them. 

To  illustrate:  A  bank  in  an  agricultural  community  collects 
the  credits  which  are  made  for  that  community  through  the  sale 
of  its  products  and  the  shipment  to  market  of  its  grain  and  the 


NATIONAL     BUSINESS     CONGRESS  285 

livestock.  If  the  business  of  that  community  could  be  divided  into 
seasons  and  for  six  months  of  the  year  the  profits  of  that  com- 
munity could  be  accumulated,  it  would  result  very  largely  in  the 
increase  of  the  deposits  of  its  banks ;  and,  if  that  were  the  only 
part  of  the  transaction,  at  the  season  of  the  year  when  the  crops  and 
the  livestock  had  been  moved  to  the  market,  the  deposits  of  the 
banks  would  show  the  highest  point  of  the  year.  But  all  the  while 
there  is  another  process  going  on,  for,  while  that  community  may 
raise  wheat,  oats  and  live  stock  in  abundance  and  in  excess 
of  their  own  requirements,  they  do  not  produce  dry  goods,  gro- 
ceries, hardware,  etc.  So  while  they  are  exporting  their  products 
to  the  different  markets  of  the  world  they  are  importing  products 
which  they  do  not  produce,  and  those  products  are  paid  for  by 
checks  upon  the  banks  of  the  merchants  buying  bills  of  exchange 
sent  to  the  cities  from  which  the  commodities  are  purchased.  In 
that  way  and  through  that  process  the  bank  in  a  local  community 
is  always  ofifsetting  the  credits  of  the  community  with  its  debits, 
and  the  only  use  for  money  that  the  bank  has  itself  is  to  take  care 
of  the  credits  going  farther  away  from  home  than  usual,  and  which 
have  not  yet  discharged  their  duty  and  returned  to  be  charged  up 
on  the  books  and  offset  by  the  debits  on  the  other  side. 

For  fifty  years,  nearly,  we  have  had  a  rapidly  changing  con- 
dition in  this  country.  The  rapid  development  of  the  country, 
causing  an  increasing  area  of  land  to  be  brought  under  cultivation, 
has  widened  our  scope  of  activities  constantly,  and  this  process  of 
extending  our  credits,  through  the  use  of  credit  in  business,  has 
gone  on  continually,  until  we  have,  in  my  opinion,  reached  a  point 
where  the  reserve  balances  against  the  credit  needed  for  the  trans- 
action of  our  business  are  about  as  small  as  we  can  consistently  have 
them. 

Under  the  law  requiring  reserves  the  various  banks  of  the 
country  to-day,  in  an  effort  to  increase  their  reserve,  must  of  neces- 
sitv  draw  against  their  correspondents  in  other  cities,  and  thereby 
deplete  the  reserves  of  those  cities.  So  that  any  effort  on  the  part 
of  banks  generally  to  replenish  their  reserves  must  tear  asunder 
the  reserves  at  other  points.  Consequently,  when  a  season  of  un- 
rest occurs,  when  business  men  have  some  apprehension  about  an 
ability  to  get  money  or  to  get  credit,  and  banks  undertake  to  re- 
plenish their  own   reserves,  because  of   this  unsettled  confidence. 


''"'    ''286  NATIONAL     BUSINESS     CONGRESS 

chaos  is  created,  and  if  we  are  not  careful  we  are  plunged  into  a 
condition  like  that  of  1907,  when  we  were  in  the  midst  of  a  panic. 

Personally,  I  contend  that  there  has  never  heen  a  panic  in  the 
world  that  has  not  come  subsequent  to  an  inability  on  the  part  of 
the  solvent  business  men  to  secure  credit.  So  long  as  your  checks 
answer  the  purpose  of  currency  in  their  transactions — and  they  do 
answer  that  purpose  so  long  as  they  are  out  serving  that  purpose — 
you  have  no  need  of  currency  and  no  desire  for  it. 
;  •  If  you  will  reflect,  you  will  all  recall  that  in  the  fall  of  1907 

there  was  no  effort  made  whatever  upon  the  part  of  the  public  to 
hoard  money  until  after  the  banks  of  the  country  were  obliged  to 
refuse  to  extend  credit  to  them.  And,  indeed,  I  believe,  that  if  in 
the  panic  of  1907  $500,000,000  more  of  credit  could  have  been 
offered  to  the  business  interests  of  this  country  the  panic  of  that 
year  would  have  been  averted.  Now,  if  I  am  correct  in  this 
theory,  the  thing  that  we  most  need  in  the  correction  of  our  cur- 
rency system  is  to  have  adopted  some  law  which  will  provide  an 
institution  or  some  vehicle  of  some  kind  which  will  protect  our 
credits  to  an  extent,  first,  that  will  have  an  ability  to  transfer  credit 
of  one  form  into  credit  of  another  form,  or  whatever  form  we 
may  care  to  have  it,  even  to  the  securing  of  bank  notes,  which 
phase  I  will  touch  upon  later. 

Then  we  must  have  established  in  protection  to  our  credit  an 
institution  which  will  have  the  right  under  the  law,  to  issue  credit, 
under  the  proper  safeguard.  I  contend,  therefore,  that  legislation 
should  provide  for  at  least  three  essential  things :  First,  it  should 
have  a  credit  creating  power ;  second,  it  should  have  the  right  to 
issue  its  own  notes,  properly  secured  and  safeguarded;  and,  further- 
more, whatever  is  provided  shall  safeguard  against  over-expansion 
of  credit. 

Now,  gentlemen,  you  all  well  know  that  the  country  has  had 
submitted  to  it  for  its  consideration  at  this  time  a  plan  for  the 
revision  of  our  currency  and  banking  laws,  proposed  by  the  Chair- 
man of  the  National  Monetary  Commission,  and  while  I  know  full 
well  that  that  plan  wull  not  meet  the  views  of  everybody — indeed, 
I  doubt  that  it  will  meet  the  full  views  of  anyone  who  has  to  do 
with  the  subject — still,  from  my  point  of  view,  having  been  actively 
engaged  and  associated  with  those  who  have  had  to  do  with  the 
framing  of  that  bill,  I  say  I  firmly  believe  that  in  the  consensus  of 


NATIONAL    BUSINESS    CONGRESS  287 


opinion  of  the  business  men  of  this  country  it  represents  the  best 
thing  possible  that  we  can  get  at  this  time.     (Applause.) 

At  the  very  beginning  of  the  study  of  this  question  the  first 
and  foremost  problem  that  confronted  those  who  had  the  work 
in  charge  was  its  political  aspect;  the  ability,  if  you  please,  to  have 
the  bill  passed,  was  infinitely  greater  than  the  economic  problem. 
The  bill  was  presented  to  the  country  in  a  tentative  form  for  con- 
sideration some  months  ago.  Since  that  time  there  has  been  much 
discussion  and  some  criticism  of  it.  Some  amendments  have  been 
made  to  the  bill  with  a  view  of  covering  or  meeting  such  criticism, 
and,  in  my  opinion,  the  revised  plan,  as  it  is  now  presented  to  the 
people  for  consideration,  is  about  as  nearly  fitted  to  take  care  of 
the  needs  of  business  as  anything  which  we  can  hope  to  have 
adopted. 

It  is  to  be  regretted  that  legislation  of  such  importance  as  this 
must  bow  to  and  be  hindered  more  or  less  by  the  prejudices  of 
the  people  of  this  country.  I  recognize  that  this  is  perhaps  the 
most  inopportune  time  to  have  legislation  of  this  kind  come  up  for 
consideration,  and,  furthermore,  following  as  it  does  upon  the 
heels  of  tariff  legislation,  that  the  criticism  created  as  the  result  of 
that  legislation  is  a  handicap  against  this  bill  to  no  inconsiderable 
extent.  I  recognize  that  prejudices  have  been  aroused,  and  I  know 
there  are  many  people  who  profess  to  know  nothing  about  the  bill, 
but  who  are  opposed  to  the  author  and,  therefore,  opposed  to  the 
bill.  Now,  I  am  here  to-night  to  defend  no  one,  nor  am  I  here  to 
criticise  anyone,  yet  I  feel  that  I  would  not  be  doing  my  duty  if 
I  did  not  have  the  moral  courage  to  say  to  you,  gentlemen,  as  a 
result  of  having  sat  in  almost  every  conference  w'hich  has  been 
held  upon  this  subject  by  those  in  authority  in  the  preparation  of 
the  bill,  that  I  believe  the  most  honest  and  conscientious  thought 
has  been  given  to  it  by  those  who  have  had  it  in  charge.  I  want  to 
say,  furthermore,  that  I  believe  the  entire  bill  has  been  constructed 
around  the  one  premise,  to  begin  with,  that  the  individual  banks 
throughout  the  country  should  not  be  disturbed;  that  they  should 
continue  their  entity;  that  they  should  not  be  threatened  by  the 
establishment  of  governmental  competitive  banking  in  this  country. 
But,  strange  to  say,  while  the  bill  was  constructed  upon  this 
premise,  with  the  foremost  thought  in  the  minds  of  those  who  had 
to  do  with  it  being  the  conservation  of  our  present  individual 
banks,  some  25,000  in  nmnber,  the  first  criticism  we  had  of  the 


288  NATIONAL     BUSINESS     CONGRESS 

bill  came  from  that  source.  I  think  a  careful  study  of  the  plan 
by  them  has  convinced  the  average  banker  in  the  country  that  the 
bill  is  not  calculated  to  destroy  him.  but  on  the  contrary  that  it 
is  proposed  to  be  helpful  to  him. 

I  cannot,  in  the  few  minutes  at  my  disposal,  undertake  to  go 
into  any  special  detailed  discussion  of  this  plan.  You  all  know 
what  it  is ;  you  have  heard  it  discussed,  and  I  have  no  doubt  but 
that  you  have  all  read  it.  In  my  judgment,  it  will  come  as  nearly 
serving  our  purposes  as  any  plan  which  can  be  suggested,  although 
those  who  have  this  work  in  charge  recognize  that  they  have  many 
handicaps  to  contend  with ;  they  expect  they  will  stub  their  toes 
frequentlv,  and  fall  perhaps,  but,  feeling  conscious  that  their  work 
has  been  along  the  right  line,  they  will  get  up  and  push  forward 
until  success  crowns  their  work. 

I  believe  that  it  is  especially  unfortunate  that  legislation  so  im- 
portant as  currency  legislation  should  be  made  the  tail  to  the  tarifif 
kite — and  that  is  about  the  position  in  which  the  bill  was  sought  to 
be  placed  by  a  number  of  people.  That  is  wrong.  I  do  not  agree 
with  the  tarifif  schedule  as  it  was  made.  I  do  not  agree  with  the 
views  of  those  who  had  the  framing  of  the  tarifif  schedule.  I  do 
not  agree  with  them  in  many  things,  yet  I  hope  I  am  too  broad- 
gauged  and  too  fair-minded  to  allow  my  prejudices  to  stand  in  the 
w^ay  of  recognizing  that  which  is  good  presented  by  those  people, 
or  by  anyone  else  for  that  matter.  For  myself,  I  believe  that  I 
should  take  the  mote  out  of  my  own  eye  before  I  look  for  the  beam 
in  my  neighbor's.  And  I  believe  that  so  long  as  we  approach  the 
discussion  and  the  settlement  of  these  questions  in  the  spirit  of 
prejudice  just  so  long  are  we  going  to  have  the  contention  which  is 
interfering  with  our  business  at  this  time, 

I  am  reminded  at  the  moment  of  a  little  story  that  I  saw  in 
the  paper  a  few  nights  ago.  Some  place  in  the  city  a  water  main 
had  been  broken,  and  an  employe  of  the  city  had  taken  a  wrench 
and  gone  to  the  hydrant  and  was  turning  it  round  and  round  and 
round,  shutting  ofif  the  water  in  order  that  they  might  get  down  to 
the  main  to  repair  the  break.  When  he  was  about  half  through 
with  his  task  he  felt  a  tap  on  his  shoulder,  and,  looking  around, 
found  a  tipsy  man,  who  said:  "I  have  caught  you  at  last."  Says 
he:  "My  friend,  somebody  has  turned  these  streets  around  here 
for  a  great  many  years,  but,  thank  God,  we  have  caught  you  at 
last."     (Laughter.) 


NATIONAL     BUSINESS     CONGRESS  289 

I  want  to  tell  you  there  has  been  some  one  turning  public 
sentiment  around  for  years,  and  it  is  about  time  we  had  caught 
him.  (Applause.)  We  are  not  going  to  catch  him  until  you  put 
your  prejudices  behind  you  and  go  about  it  in  an  intelligent,  honest, 
fair-minded  way. 

I  recognize  this  currency  question  is  going  to  be  considered 
from  many  viewpoints,  and  I  have  no  doubt  many  of  you  will  differ 
from  me  in  your  views ;  that  makes  no  diflference.  I  welcome  open- 
minded,  fair  discussion,  because  I  believe  it  will  lead  to  a  study  of 
the  bill,  and  I  believe  the  more  people  who  study  the  bill  the  more 
inclined  thev  will  be  to  come  to  a  realization  of  the  fact  that  it  is 
the  best  bill  under  all  conditions  it  is  possible  for  us  to  get  through 
at  this  time. 

I  want  to  say  that  so  far  as  the  author  of  the  bill  is  concerned, 
it  is  not  Mr.  Aldrich's  bill,  nor  the  bill  of  any  one  man.  It  is  the 
creation  of  many  men.  Perhaps  one  hundred  men  have  had  to  do 
with  its  construction  in  one  form  or  other.  It  represents  the  con- 
sensus of  opinion  of  many  of  the  largest  banking  men  and  business 
men  of  this  country.  Conference  after  conference  has  been  held 
on  the  subject.  I  have  attended  conferences  when  there  were 
present  twenty-five  to  forty  people  from  dififerent  sections  of  the 
country,  each  one  having  gone  with  a  view  of  picking  the  bill  to 
pieces  and  criticising  it  from  the  standpoint  of  the  benefit  it  would 
be  with  respect  to  their  own  communities.  After  a  comprehensive 
discussion,  however,  they  would  withdraw  practically  all  of  their 
criticism,  for  they  found  that  the  bill  embodied  the  features  they 
thought  ought  to  be  in  it,  when  it  was  properly  analyzed  and  they 
properly  understood  it. 

And  now  there  have  been  several  bogies  raised ;  they  are  always 
raised  over  questions  of  national  importance.  I  have  to  smile  when 
I  think  of  some  of  them:  "Wall  Street."  You  ask  the  average 
man  who  criticises  Wall  Street  why  he  criticises  it,  and  he  doesn't 
know ;  it  is  just  Wall  Street. 

I  cannot  refrain  from  telling  you  a  little  story  bearing  upon 
this  subject.  About  eighteen  months  ago  I  was  out  at  Kansas  City 
and  I  met  one  of  those  fellows  who  held  that  Wall  Street  ought 
to  be  regulated.  He  stood  in  the  lobby  of  the  hotel,  and,  knowing 
that  I  was  from  Chicago  and  a  banker,  he  talked  very  drastically 
about  capital  and  capitalization,  and  money  and  credits,  and  all  that 
sort  of  thing,  until,  after  a  short  time,  realizing  that  he  was  talking 


290  NATIONAL     BUSINESS     CONGRESS 

for  my  benefit,  I  said:  "My  friend,  I  may  be  mistaken — I  have 
no  inclination  to  intrude  here  if  you  don't  mean  me,  but  if  you  are 
talking  to  me  I  will  be  very  glad  to  hear  you,  provided  you  will 
divide  time."  He  replied:  "I  will  be  glad  to."  I  asked:  "What 
is  your  business?"  He  replied:  "It  is  real  estate."  I  asked  him 
if  he  lived  in  Kansas  City  and  he  said  he  did.  I  asked  him  where 
he  sold  real  estate,  and  he  said:  "In  Mexico  and  Texas."  I  said: 
"Do  you  sell  it  for  cash?"  He  answered:  "No;  I  sell  it  on  from 
two  to  ten  years'  time."  I  said:  "How  do  you  get  your  people 
out  there  to  see  it?"  He  answered:  "By  the  railroads."  "You 
don't  use  the  railroads  to  take  your  men  down  there  to  sell  your 
real  estate  after  all  the  talk  you  have  given  me  about  railroads?" 
I  asked.  He  replied:  "Yes;  sure."  I  said:  "Do  you  sell  for 
cash?"  "No,"  he  replied,  "I  usually  get  a  reasonable  payment  down 
and  give  credit  for  from  three  to  ten  years'  time  on  the  balance." 
I  said:  "It  takes  a  great  deal  of  money,  does  it  not,  to  handle  a 
business  of  this  character?"  and  he  said,  "Yes."  I  asked  him  how 
he  got  the  capital.  He  said:  "If  I  sell  a  piece  of  land  to  a  man 
in  Illinois  and  the  man  is  good,  I  can  go  to  the  banker  in  the 
locality  where  he  is  living  and  discount  the  note;  the  local  banker 
knows  he  is  good  and  for  a  liberal  discount  will  purchase  the  note 
from  me."  I  said:  "I  suppose  you  do  not  feel  that  you  are 
speculating?"  and  he  said,  "Oh.  no,  certainly  not."  I  said:  "Do 
you  know  that  a  man  on  Wall  Street  knows  where  he  stands  every 
night?    His  transactions  are  all  on  the  basis  of  cash." 

I  then  asked :  "What  makes  your  city  great  here  ?"  "Why," 
he  says;  "we  have  sixteen  or  seventeen  distinct  lines  of  railroad 
running  out  of  here." 

I  says :  "If  one  railroad  is  such  a  terrible  thing,  sixteen  must 
be  awful.  What  is  that  car  down  there?"  He  answered:  "That 
is  a  Pullman  car — sleeping  car." 

I  asked  him  who  owned  it,  and  he  said :  "The  Pullman  Com- 
pany in  Chicago."  I  then  asked:  "What  is  it  there  for?"  Here- 
plied  that  it  was  for  the  convenience  of  "our  people." 

After  further  questioning  he  admitted  that  he  could  go  to  bed  in 
that  car  there  in  Kansas  City,  sleep  all  night  as  comfortably  as  he 
could  in  his  own  bed  and  wake  up  in  the  morning  in  Chicago 
refreshed  from  his  night's  rest. 

And  I  then  asked:  "What  is  that  viaduct  down  there  for?" 
He  replied :    "That  was  built  to  save  lives.    People  go  down  there 


NATIONAL     BUSINESS     CONGRESS  291 


in  the  packing  houses  to  work,  and  before  they  had  that  they  used 
to  kill  two  or  three  people  a  week,  but  since  they  put  it  there  we 
have  no  accidents." 

I  asked  him:  "Did  your  capital  build  it?"  "No,"  he  stated. 
"Boston  capital  built  it." 

I  said:  "I  understand  you  are  going  to  have  a  new  station 
here,  and  are  going  to  spend  seven  or  eight  million  dollars  in  its 
erection.  Who  is  going  to  build  it?"  He  answered:  "The  rail- 
roads." I  asked  him  what  railroads.  Mr.  Harriman  was  then 
living  and  he  answered :  "I  suppose  Harriman  and  his  associates." 
I  asked  him  what  that  was  going  to  do  for  his  city,  and  he  said: 
"Why.  it  is  going  to  make  it  much  more  convenient  for  the  people 
going  through."  I  said :  "Is  Kansas  City  going  to  invest  a  dollar 
in  there?"    He  said:    "No;  the  railroads." 

It  went  on,  and  I  asked :  "These  tall  buildings  here ;  have  they 
all  been  paid  for?"  He  said:  "No.  The  tall  ones  maybe  have 
plasters  on."  I  asked  him  if  the  mortgages  were  owned  in  Kansas 
City.    He  said:    "No;  in  New  England  mostly." 

Then  I  said:  "What  have  you  here  that  you  own  and  that 
you  put  your  own  money  into  ?"  He  answered :  "The  water  works 
is  owned  locally,  and  practically  everything  that  contributes  to  the 
conveniences  of  Kansas  City  was  furnished  by  a  few  people,  as 
they  call  it,  representatives  of  Wall  Street." 

They  were  condemning  their  benefactors  and  had  no  realiza- 
tion of  it.  I  said:  "How  would  you  get  those  men  to  Texas  and 
Mexico  to  buy  your  land  if  it  were  not  for  the  men  whom  you  have 
been  condemning  so  severely?  What  makes  your  city  great?"  He 
answered :  "Why,  the  railroads,  of  course."  I  said :  "Your  mer- 
chants can  stand  in  their  doors  and  sell  goods  almost  in  the  very 
doors  of  the  people  in  New  Mexico  and  Arizona  because  of  the 
network  of  railroads  you  have  here."  I  said :  "If,  by  some  magic, 
or  the  same  degree  of  reasonableness  with  which  you  have  been 
criticising  and  condemning  Wall  Street,  all  of  these  vast  improve- 
ments could  be  taken  away  from  you,  and  you  woke  in  the  morn- 
ing and  found  Kansas  City  minus  those  improvements,  you,  and 
everyone  like  you,  would  get  down  on  your  knees  and  pray  the 
Lord  to  restore  the  city  to  its  former  state  of  development."  I 
said :  "It  is  just  such  indiscriminate  criticism  that  is  creating  these 
national  problems." 


292  NATIONAL     BUSINESS     CONGRESS 

That  distorted  condition  of  affairs  is  what  is  bringing  you  here, 
gentlemen.  People  criticise  without  any  knowledge,  criticising  their 
benefactors  in  reality,  and  so  long  as  we  as  business  men  go  on  and 
submit  to  this  making  of  public  sentiment,  which  has  nothing  of 
conservatism,  nothing  of  fairness  and  nothing  of  justice  in  it,  just 
so  long  will  we  find  things  awry. 

Gentlemen,  I  have  departed  from  my  subject,  and  I  must  not 
take  very  much  more  of  your  time.  I  want  to  add  that  the  adop- 
tion in  this  country  by  the  National  Reserve  Association  of  this 
plan  will,  in  my  opinion,  provide  the  machinery  for  creating  the 
credit  in  this  country  necessary  to  enable  every  man,  under  normal 
conditions,  if  he  is  responsible,  to  secure  the  credit  necessary  for 
the  conduct  of  his  business,  and  I  believe,  furthermore,  that  the 
restrictions  thrown  around  it  will  prevent  over-expansion. 

Some  people  say  that  you  are  going  to  establish  an  institution 
that  will  extend  credit  ad  infinitum.  There  is  no  intention  of  that 
kind.  Then  we  hear  criticism  upon  the  theory  that  it  is  going  to 
centralize  the  money  power.  I  think  I  can  make  it  plain  to  you 
where  the  money  power  lies  to-day ;  I  believe  you  already  know,  if 
you  will  stop  and  consider  carefully,  and  I  believe  anyone  within 
the  sound  of  my  voice  realizes  that  at  this  time  the  money  power  is 
in  the  hands  of  at  least  half  a  dozen  men.  We  have  reserve  centers 
carrying  the  reserves  to-day,  and  the  banks  all  over  the  country  are 
dependent  upon  those  reserve  centers. 

The  institution  of  which  I  am  President  carries  the  reserves 
of  a  greater  number  of  banks  than  any  other  institution  in  Amer- 
ica. Our  clients  are  located  in  every  State  in  the  Union,  and,  gen- 
tlemen, in  the  last  analysis  the  ability  of  those  people  to  secure 
money,  if  they  depend  upon  me,  and  if  they  stay  with  me  and  afe 
unable  to  go  elsewhere,  depends  upon  what  ?  First,  upon  my  ability 
to  get  money  and  furnish  it  to  them,  and,  secondly,  upon  whether 
or  not  I  have  an  inclination  to  meet  their  wishes. 

In  normal  conditions,  of  course,  when  money  is  easy,  they  can 
get  money  from  me  and  from  my  neighbor.  But  I  am  talking, 
gentlemen,  about  times  when  everybody  has  a  demand  for  money, 
and  when  the  banks  by  reason  of  the  peculiar  requirements  of  re- 
serve are  unable  to  extend  credit  in  proportion  to  the  reasonable 
business  requirements. 

In  the  thirty-one  years  of  my  banking  experience,  I  have  seen 
manv  a  time  when  I  have  found  it  impossible  to  meet  the  require- 


NATIONAL     BUSINESS     CONGRESS  293 


ments.  and  the  legitimate  reciuirements  too,  of  the  people  of  the 
community  who  made  application  to  me  for  money,  and  still  con- 
fine myself  to  the  requirements  of  the  law,  so  far  as  the  mainte- 
nance of  reserve  is  concerned.  The  result  is  that  in  times  of  pres- 
sure we  must  disregard  the  law  or  we  must  discontinue  to  extend 
credit,  thereby  creating  chaos  and  disorder  in  business  and  some- 
times bringing  on  panics,  as  was  the  case  in  1907.  I  say  we  must, 
if  we  serve  the  community,  make  law-breakers  of  ourselves  to  the 
extent  of  encroaching  upon  our  reserves.  You  can  do  that  to  a 
certain  point,  but  in  times  like  1907,  1893  and  1873  and  periods  like 
those,  when  the  demand  is  altogether  out  of  proportion  to  the 
ability  of  the  banks  to  meet  it,  there  is  only  one  alternative,  and  that 
is  to  decline  credit ;  and  you  are  the  very  type  of  men  who.  through 
your  fear  and  your  loss  of  confidence,  when  declined  credit,  create 
panics. 

When  men  with  good  collateral  are  not  able  to  go  to  their  banks 
and  secure  credit,  they  think  something  peculiar  has  happened,  and 
it  has;  but  is  it  not  also  peculiar  that  when  those  very  men  are 
denied  such  credit  they  do  not  seem  to  have  a  proper  measure  of  ap- 
preciation of  the  necessity  for  a  change  in  or  a  modification  of  the 
currency  laws  which  denies  them  that  credit  ? 

During  these  recurring  seasons,  when  there  is  an  immense  de- 
mand for  money  for  crop-moving  purposes,  etc.,  the  people  ask: 
"Why  don't  the  banks  carry  a  reserve  sufficient  to  meet  these  de- 
mands?" A  gentleman  made  that  very  remark  to  me  a  short  time 
ago,  and  I  said :  "Very  well,  I  w^ill  accept  your  suggestion  and,  as  a 
basis  for  preparation  for  that,  since  we  are  extending  to  you  a  line 
of  $300,000  of  credit,  you  will  have  to  get  along  with  $150,000." 
He  retorted :  "My  dear  Sir,  I  need  all  the  money  I  am  now  using. 
I  can  not  pay  down  50  per  cent  of  my  loan  and  still  do  business ;" 
and  that  is  the  situation  as  applied  to  each  individual. 

One  reason  for  the  indifference  of  the  average  business  man 
to  this  kind  of  currency  legislation,  is  due  to  the  fact  that  if  he  is 
good  he  has  had  such  good  treatment  from  his  banker  that  he  does 
not  appreciate  the  impending  danger.  But  we  all  have  a  very  vivid 
recollection  of  1907.  and  what  happened.  We  all  know  what  1907 
was ;  we  know  how  we  handled  the  situation.  We  repudiated  pay- 
ments ;  everybody  did.  It  w^as  not  applied  to  the  banks  alone,  but  to 
everybody  practically.  It  was  the  safeguard  to  the  whole  situation. 
Two  years  following.  1909,  money  was  the  cheapest  throughout  the 


294  NATIONAL     BUSINESS     CONGRESS 


year  in  Chicago  that  it  has  been  during  the  fifteen  years  of  my  resi- 
dence in  this  city.  In  the  fall  of  1909,  rather  in  midsummer  of 
1909,  money  was  cheaper  than  it  had  ever  been  known  to  be  in  the 
city  of  Chicago.  The  banks  having  a  large  number  of  correspond- 
ents had  prepared  themselves,  as  they  believed,  admirably  for  any 
condition  that  might  prevail  through  an  increasing  demand  for 
money  in  that  fall.  They  had  invested  largely  in  commercial  paper 
on  the  theory  that  as  that  was  paid,  they  would  have  means  to  meet 
declining  deposit,  and  in  the  end  have  money  enough  to  loan  to  their 
own  customers  to  meet  their  requirements,  but  they  overlooked  one 
little  thing.  In  the  fall  of  1909,  we  had  a  severe  snow  storm,  and 
you  business  men  will  recall  that  we  had  a  blockade  here  for  nearly 
three  months,  so  that  the  preparation  during  nine  months  of  the 
year  for  the  activity  for  fall  or  crop  moving  business  was  cast 
aside  and  amounted  to  naught.  I  want  to  say  here  and  now,  be- 
cause you  did  not  know  anything  about  it  before,  that  the  fall  of 
1907  was  not  a  circumstance  to  what  the  fall  of  1909  was.  The 
result  was  that  the  banks  in  every  large  center  in  the  country,  acting 
as  reserve  for  any  number  of  banks,  if  they  served  their  customers 
to  keep  the  progress  of  business  open,  had  to  impair  their  reserves. 

You  say  why  did  they  do  it  ?  Simply  because  a  failure  to  have 
done  that  would  have  made  it  impossible  for  the  farmer  to  have 
realized  credit — I  am  not  talking  about  cash — for  the  farmer  to 
have  realized  credit  against  drafts  with  bill  of  lading  attached  for 
his  shipments  of  products. 

I  will  cite  an  incident  that  occurred  in  my  own  business  in  the 
fall  of  1909.  We  were  obliged  at  that  time  to  extend  lines  of  credit 
to  our  commission  grain  men  four  or  five  or  six  times  the  amount 
to  which  they  were  entitled,  for  the  very  reason  that  the  people  who 
were  loading  grain  in  cars,  were  securing  bills  of  lading  for  that 
grain  and  forwarding  them  to  the  commission  men  with  drafts  for 
75  to  80  per  cent  of  their  value. 

The  commission  men,  in  the  first  instance,  had  to  borrow  the 
money  with  which  to  pay  these  drafts,  and  as  they  were  paid  the 
credit  which  they  represented  was  transferred  to  the  country  banks, 
in  order  that  their  customers  might  have  funds  with  which  to  pay 
their  bills  at  the  grocery  stores,  dry  goods  and  hardware  stores  and 
every  other  debt  of  that  community. 

Gentlemen,  what  do  you  suppose  would  have  happened  in  the 
fall  of  1909  if  the  banks  in  Iowa  and  other  sections  of  the  country, 


NATIONAL    BUSINESS     CONGRESS  295 


in  sending  in  bills  of  lading  with  drafts  attached  for  75%  of  the 
value  of  grain  could  not  have  gotten  credit  in  Chicago?  It  would 
have  taken  no  seer  to  forecast  the  result.  We  were,  in  order  to 
avoid  impending  disaster,  compelled  to  loan  the  grain  men  to  pay 
those  drafts,  even  to  the  impairment  of  our  reserves. 

Fortunately,  we  knew  that  when  the  spring  sun  would  come 
it  would  melt  the  snow  and  the  grain  would  move  in  and  the  drafts 
would  be  paid.     Fortunately,  that  situation  could  not  last  forever. 

A  grain  man  came  to  me  one  day  and  cited  the  following  illus- 
tration as  an  evidence  of  the  necessity  for  his  securing  credit.  He 
said :  "Ten  weeks  ago,  a  bank  in  Red  Oak,  Iowa,  drew  on  me  for 
a  car  load  of  corn,  and  I  borrowed  the  money  from  you  with  which 
to  pay  for  it.  Not  hearing  from  the  car  within  a  reasonable  time, 
I  started  a  tracer  after  it,  and  after  waiting  some  little  time  and  not 
having  heard  from  it.  I  wrote  to  the  shipper  and  asked  him  if^  he 
would  not  be  good  enough  to  trace  it  from  the  other  end  of  the  line. 
His  replv  was  to  the  effect  that  it  was  not  a  difficult  task  to  do  this, 
as  the  car  sat  under  the  spout  just  where  it  was  loaded  many  weeks 
before." 

The  credit  which  we  had  given  to  this  grain  man  had.  in  fact, 
been  outstanding  for  ten  weeks,  and  in  the  multiplicity  of  just  such 
transactions  our  reserves  had  been  threatened.  It  would  have  been 
impossible  for  us  to  have  continued  this  process  for  six  months,  as 
we  would  have  been  plunged  into  a  panic  the  like  of  which  the  panic 
of  1907  would  not  have  been  a  circumstance. 

Do  you  think  you  are  safe  in  the  conduct  of  your  business  with 
such  facilities  to  protect  the  credit  of  the  country?  I  don't  think 
vou  are.  You  go  to  your  local  bank.  If  the  credits  extended  there 
are  not  out  of  proportion  to  their  reserve  they  give  you  credit,  but  if 
they  have  loaned  to  a  point  where  to  extend  additional  credit  would 
impair  their  reser\'e.  they  must  get  help  from  their  correspondent, 
and  that  help  must  come  from  Chicago,  New  York  or  St.  Louis  in 
the  last  analysis.  If  the  relationship  between  our  reserve  and  the 
credits  which  we  have  extended  is  proper,  we  can  discount  their 
paper  and  give  them  credit;  if  it  is  not,  there  is  not  a  place  in 
Christendom  where  they  can  get  credit,  for  we  are  as  helpless  as 
new  born  babes  to  relieve  the  situation  in  your  community  if  we 
are  compelled  to  depend  upon  our  present  currency  system  for  it. 

r  contend  we  are  sitting  over  a  mine,  as  it  were,  all  the  time. 
We  have  =;pread  and  grown  and  improved  in  every  direction.     We 


296  NATIONAL     BUSINESS     CONGRESS 

have  raised  this  year  from  the  soil,  perhaps  $9,000,000,000  worth  of 
products,  and  yet  we  have  no  husiness.  We  are  all  complaining 
today  about  slow  business,  the  depression  of  business.  It  is  due, 
in  part,  to  an  inadccjuate  currency  system  on  the  one  hand  and,  in 
part,  to  an  agitation  of  politics,  and  to  a  criticism  by  one  man  of  his 
neighbor  without  knowing  very  often  what  he  is  criticising.  We 
have  grown  so  in  the  habit  of  throwing  bricks  at  our  neighbors  that 
we  are  retrogressionists.  I  contend  that  the  most  important  ques- 
tion before  the  country  is  the  currency  question,  and  I  believe  that 
those  who  attend  these  conferences  can  do  no  more  notable  work 
or  work  that  will  redound  to  their  credit  more.  Gentlemen,  than 
to  go  home  and  exercise  their  energies  to  disseminate  information 
regarding  currency  legislation.     (Applause.) 

I  do  not  ask  you  all  to  agree  with  me,  but  to  study  the  subject, 
and  I  am  confident  in  the  belief  that  you  will  come  to  the  conclusion 
that  the  bill  as  presented  is  perhaps  as  nearly  a  perfect  bill  as  we 
can  get. 

As  I  said  before,  it  does  not  embody  all  the  things  that  I  would 
like  to  see  in  it,  but  I  believe  if  it  is  adopted,  it  will  give  us  an  insti- 
tution through  which  we  can  protect  our  credit  to  the  extent  of  being 
able  to  extend  credit,  in  times  of  pressure,  in  amounts  necessary  to 
meet  the  reasonable  requirements  of  business.  I  believe  it  is  as 
nearly  safeguarded  against  over-expansion  as  is  possible.  I  think  the 
question  of  control  is  safeguarded,  that  there  is  not  much  danger  of 
its  falling  into  the  hands  of  individuals  and  being  used  improperly. 

I  believe  the  money  power  now  lies  in  the  hands  of  a  dozen  men. 
I  plead  guilty  to  being  one,  in  the  last  analysis,  of  those  men.  It  is 
a  responsibility  that  I  do  not  want  to  continue,  because  I  have  no 
outlet;  I  have  no  place  to  which  I  can  turn  in  time  of  need  to  dis- 
count the  paper  which  your  banks  must  at  times  send  to  me.  There- 
fore, I  am  doing  all  I  can  to  encourage  the  people  of  this  country  to 
co-operate  with  us  and  to  enact  a  law  which  will  protect  our  credits 
and  foster  our  prosperity. 

There  has  been  a  great  deal  said  about  centralization  of  power. 
I  contend  that  this  institution  would  cause  a  de-centralization  of 
power.  I  believe  that  two  or  three  in  New  York,  two  or  three  in 
Chicago  and  two  or  three  in  St.  Louis  could  control  the  question  of 
whether  or  not  loans  should  be  made  to  correspondents  throughout 
the  country.  If  you  will  stop  and  think  a  moment,  you  will  realize, 
and  I  am  sure  you  will  agree  with  me.  that  reserve  is  not  the  power 


N  A  T  I  ONAL     BUSINESS     CONGRESS  297 

that  transacts  business.  The  transaction  of  business  is  based  upon 
credit ;  it  is  the  vital  force  of  all  business  transactions.  What  is 
reserve?  Money  which  it  is  proposed  to  lay  in  the  vaults  of  the 
association  and  will  not  be  disseminated  for  use.  If  a  man  would 
carry  a  tin  pail  of  gold  to  your  office  in  some  transaction,  you  would 
think  he  had  been  dead  for  twenty-five  years  and  ought  to  be  buried. 

That  reserve  is  lawful  money  of  the  country  which  the  banks 
of  the  country  are  expected  to  carry  in  their  vaults  and  for  what? 
For  protection  against  credits  with  that  institution.  What  does  that 
enable  us  to  do?  Tf  you  increase  the  amount  of  reserve  in  that 
Association,  you  increase  the  credit  which  it  can  extend.  And  what 
do  you  do  with  that  credit?  Do  you  leave  it  in  my  hands,  or  in 
the  hands  of  two  or  three  associations  in  the  country?  No,  sir; 
you  put  it  in  the  hands  of  five  thousand  banks  scattered  through  this 
country,  and  in  the  last  analysis  you  get  the  dissemination  of  that 
credit,  not  to  any  body  of  people  in  the  reserve  cities  as  is  now  the 
case,  but  back  into  the  hands  of  the  local  bankers,  the  man  who 
knows  you  in  your  respective  home  better  than  I  could  know  you. 
And  the  man  will  be  able,  if  this  bill  is  adopted,  to  and  can  give  you 
credit  against  your  reasonable  needs,  provided  you  can  convince  him 
you  are  solvent  and  entitled  to  it. 

The  plan  is  that  discounts  may  be  made  by  any  bank  joining 
the  Association,  and  twenty-five  thousand  can  join  it  if  they  will — 
perhaps  not  so  many  because  of  the  capital  restrictions  which  would 
prevent  that — but  the  majority  of  the  incorporated  banks  can  join 
the  Association,  and  they  will  have  a  right  to  discount  paper  to  an 
amount  equal  to  their  capital  stock.  So  that  if  this  becomes  a  law, 
in  the  future  a  bank  in  your  community,  in  which  you  deal,  will  not 
be  compelled  to  come  to  Chicago  to  see  if  it  can  get  due  credit,  but  it 
can  go  to  the  one  of  the  fifteen  branches  nearest  it  and  discount  your 
paper  to  an  amount  equal  to  its  capital  stock. 

If  that  is  not  de-centralization  of  the  money  power,  I  don't 
know  what  it  is.  Do  you  suppose  I  would  be  here  advocating  the 
adoption  of  a  bill  that  would  centralize  it?  Not  by  any  means. 
And  I  want  to  say  that  if  the  bill  would  give  to  me,  myself,  that 
power,  I  would  be  the  last  man  in  America  to  want  to  assume  that 
responsibility.  In  all  these  matters  we  must  have  a  broader  con- 
ception of  our  duty  to  our  citizenship.  We  should  remember  that 
in  proportion  as  other  sections  of  the  country  prosper,  just  in  that 


298  NATIONAL     BUSINESS     CONGRESS 

proportion  you  are  likely  to  prosper  in  your  own  city  and  com- 
munity. 

I  say  the  bill  that  has  been  presented  for  your  consideration  is 
so  constructed,  I  believe,  as  to  provide  against  these  threatened  de- 
pressions in  money  and  credit.  I  am  not  so  foolish  as  to  believe  that 
any  legislation  can  prevent  panics.  Just  as  a  violation  of  the  physi- 
cal laws  brings  its  punishment,  just  in  the  same  measure  an  infrac- 
tion of  the  economic  law  must  always  bring  distress.  If  the  people 
lose  their  heads  and  infract  the  law  of  economics,  they  will  have  to 
pay  the  penalty,  and  no  law  under  Christendom  can  stop  it.  But  I 
do  beheve  the  adoption  of  this  law  would  create  in  this  country,  an 
institution  with  supervising  powers  that  would,  in  the  main,  prevent 
those  seasons  of  customary  depressions,  and,  in  the  main,  prevent 
panics ;  or,  if  panics  should  overtake  us,  we  can  at  least  prevent 
the  seriousness  with  which  they  have  afifected  the  business  world  in 
the  past. 

I  have  heard,  within  a  day  or  two,  one  criticism  of  the  bill, 
coming  from  State  banks.  One  gentleman,  and  in  fact  several  gen- 
tlemen, have  made  the  assertion  that  State  banks  and  Trust  com- 
panies are  being  discriminated  against.  I  contend  they  are  not. 
Under  this  bill,  if  it  is  adopted,  it  wall  be  impossible  for  collateral 
securities  to  be  used — and  I  apologize  to  my  New  York  friends  every 
time  I  make  this  statement,  because  I  say  that  if  a  bill  is  properly 
formed  it  will  be  right  to  an  extent  where  it  will  not  make  any 
difference  what  kind  of  security  is  used,  so  long  as  it  is  good,  nor 
from  what  source  it  emanates — but  this  prohibition  was  incorporated 
only  because  the  criticism  of  Wall  Street  has  been  so  great  that  it 
was  thought  best  to  prevent  its  securities  from  being  accepted  as 
collateral ;  it  has  been  so  severely  criticised  that  it  was  thought  best 
to  pay  heed  to  a  prejudice  so  widespread,  but  I  have  no  patience 
with  the  man  who  claims  that  the  bill  discriminates  against  him  for 
the  reason  that  since  the  Association  will  not  accept  collateral 
securities  for  discount,  he  will  not  get  any  benefit  from  it.  I  say 
to  that  banker,  let  him  take  the  responsibility  of  helping  to  carry  the 
commercial  risks  of  the  community  and  he  can  discount  his  paper. 

I  have  an  inquiry  from  Mr.  Jones,  who  asks:  "Will  you 
explain  how  the  Aldrich  plan  discriminates  against  Wall  Street 
speculations,  and  to  provide  for  loans  to  stock  speculators?" 

Mr.  Jones  :  I  wanted  to  know,  if  you  would,  how  the  Aldrich 
plans  discriminate  against  Wall  Street  men.     It  seems  to  be  thought 


NATIONAL    BUSINESS     CONGRESS  299 

to  be  in  our  favor,  and  if  you  will  explain  how  it  is  against  us,  I 
will  be  obliged. 

Mr.  Reynolds  :  I  think  I  might  answer  that  very  tersely  and 
not  very  elegantly  by  saying  that  Wall  Street  could  not  have  a 
look-in  as  the  bill  stands  now. 

Mr.  Jones  :     We  are  discriminated  against  ? 

Mr.  Reynolds:  You  are  discriminated  against.  And  I  want 
to  say,  in  this  connection,  and  I  say  it  with  pride,  that  when  that 
part  of  the  bill  was  prepared,  it  was  done  so  at  the  urgent  request- 
of  three  of  the  largest  bankers  of  the  City  of  New  York.  They 
said:  "We  recognize  that  no  bill  can  be  passed  that  will  give  us 
that  right."  They  said:  "It  discriminates  against  us" — I  wish  I 
could  tell  you  their  names — they  said:  "We  want  to  say  to  you 
here  and  now,  you  have  built  all  the  fences  round  Wall  Street  that 
you  can;  we  have  had  no  business  for  the  last  three  or  four  years, 
or  at  least  only  general,  and  we  have  learned  from  experience  that 
we  would  much  better  have  prosperity  throughout  the  country  gener- 
ally, as  it  will  mean  dollars  to  us  through  the  general  prosperity  to 
where  it  means  cents  through  special  privilege.  Does  that  answer 
your  question? 

Mr.  Jones:  I  just  wanted  these  gentlemen  to  understand  that 
Wall  Street  does  not  get  a  look  in,  as  you  say.  They  can  go  and 
discount  paper  for  a  man  in  Red  Oak,  Iowa,  but  they  can  not  dis- 
count a  dollar  for  a  man  trading  in  stocks. 

Mr.  Reynolds:  That  is  the  suggestion  that  came  from  those 
men.  I  think  you  will  agree  with  me  that  there  is  a  vast  difference 
between  loaning  money  on  collateral  and  loaning  on  the  responsi- 
bility of  the  merchants  and  manufacturers  of  the  town.  One  is 
investment  banking  and  the  other  is  commercial  banking;  and  this 
whole  plan  has  been  devised  to  provide  for  the  automatic  ebb  and 
flow  of  business. 

I  find  I  have  spoken  much  longer  than  I  wanted  to.  I  cannot 
refrain,  however,  from  taking  just  a  minute  more,  with  your  per- 
mission, to  say  this :  That,  to  my  mind,  the  problems  which  are 
confronting  us  today,  are  problems  which  should  be  settled  by  the 
business  men  of  this  country  and  not  by  the  fanatics  and  cranks. 
(Applause.) 


300  NATIONAL     BUSINESS     CONGRESS 

I  want  to  say,  also,  here  and  now,  that  I  believe  every  man  who 
controls  a  large  aggregation  of  capital,  the  business  of  which  belongs 
to  the  public,  owes  a  duty  to  the  public  in  the  handling  of  that 
money ;  and  I  want  to  say  to  you  that  I  believe  that  every  man  who 
recognizes  that  duty  and  does  what  he  can  to  discharge  that  duty 
and  his  own  duty  to  the  public,  has  a  right  to  ask  the  public  to  pro- 
tect that  capital.  We  must  exercise  a  more  discriminate  influence 
in  all  these  matters.  In  recent  years  we  have  been  so  engrossed  in 
our  own  affairs,  that  we  have  ignored  the  fact  that  what  has  been 
done  in  Washington  might  be  of  consequence  to  us.  We  are 
awakened  finally  to  a  realization  of  the  fact  that  it  makes  a  won- 
derful difference  what  goes  on  there  and  we  are  very  much  dis- 
turbed as  to  what  is  going  to  happen  at  Washington.  Just  what 
will  happen  there  will  be  that  which  you  Gentlemen  permit  to  hap- 
pen ;  just  in  proportion  as  you  and  I  and  other  persons  discharge  our 
duty  to  the  obligations  devolving  upon  us,  just  in  proportion  as  we 
do  our  duty  to  the  public,  just  in  that  proportion  have  we  the  right 
to  ask  the  public  to  co-operate  with  us  to  correct  those  things.  I 
contend  that  this  can  only  be  done  through  going  back,  in  the  last 
analysis,  to  the  people ;  it  can  only  be  done  through  creating  a  proper, 
sane  and  conservative  public  sentiment.  The  great  trouble  is  there 
has  been  no  discrimination.  In  one  respect,  a  discrimination  against 
aggregations  of  capital,  but  in  other  respects  none. 

I  want  to  appeal  to  you  people  as  business  men,  I  want  to 
appeal  to  you  in  the  interests  of  your  own  individual  business  and 
the  interest  of  your  own  communities  and  your  own  common- 
wealths, and  in  the  interest  of  the  Nation,  which  we  all  so  much 
love ;  I  want  to  appeal  to  you  in  the  interest  of  better  business ;  I 
want  to  appeal  to  you  in  the  interest  of  better  manhood ;  I  want  to 
appeal  to  you  along  the  lines  of  higher  principles  in  business ;  I 
want  to  appeal  to  you  along  the  lines  of  higher  ideals  in  personal 
relationship  of  managers  of  capital  to  the  public  to  do  what  you  can 
to  help  create  a  public  sentiment  which  will  not  only  settle  the  cur- 
rency question  along  lines  that  will  be  right  and  fair,  but  which  will 
settle  all  these  questions  which  are  engaging  your  attention  at  this 
time. 

I  thank  you,  and  apologize  for  taking  so  much  of  your  time, 
(Continued  applause.) 

The  Toastmaster:  We  have  had  two  very  interesting  ad- 
dresses on  the  subject  of  how  to  get  a  Alerchant  Marine.     One  of 


NATIONAL     BUSINESS     CONGRESS  301 

those  addresses  was  by  Mr.  Rosenthal,  one  of  the  prominent  Chicago 
business  men,  the  other  by  Professor  Johnson  of  the  University  of 
Pennsylvania.  I  think  I  am  safe  in  saying  that  they  are  diametri- 
cally opposite.  We  have  another  address  to  be  delivered  on  "How 
to  Get  a  Merchant  Marine,"  I  have  no  idea  what  his  views  on  the 
subject  are,  but  I  take  great  pleasure  in  introducing  to  you  Mr. 
James  L.  Ewell.     (Applause.) 


THE    RESTORATION    OF    OUR    COMMERCIAL 
FLAG   TO   THE   HIGH   SEAS. 


Address  by  Mr.  James  L.  Ewell, 

Secretary  of  the  National  Merchant  Marine  Association. 


Mr.  Ewell  :  Mr.  President  and  Gentlemen  of  the  National 
Business  Congress — It  is  hardly  necessary  for  me  to  emphasize  the 
fact  that  I  appreciate  the  honor  of  an  invitation  to  come  out  here 
and  address  you,  but  I  do  esteem  it  a  great  privilege  to  be  able  to 
place  before  such  a  distinguished  body  of  business  men  another 
phase  of  what  I  consider  a  question,  perhaps  as  great,  if  not  greater, 
than  the  question  that  has  been  discussed  by  Mr.  Reynolds,  the 
gentleman  who  preceded  me. 

I  want  to  say,  too,  that  I  share  with  my  colleagues  here,  in  the 
pleasure  of  the  splendid  entertainment  that  has  been  afforded  us 
here,  and  last  night  we  had  an  opportunity  to  see  that  Chicago  was 
giving  New  York  a  hard  chase  in  Grand  Opera,  which  I  enjoyed 
very  much. 

OUR  OVER-SEA  TRADE  THE  CORNERSTONE  OF  OUR 
FUTURE   PROSPERITY. 

This  land  of  the  starry  flag  is  known  among  the  nations  of  the 
earth  as  "The  Great  Republic."  We  are  great  in  population. 
Figures  of  the  present  census  will  surely  show  the  population  in  ex- 
cess of  90,000,000.  We  are  great  in  our  vast  expanses  of  territorial 
area;  great,  likewise,  in  the  varied  products  of  soil  and  mine  and 
mill.  According  to  conservative  estimates,  we  produced  last  year 
from  soil  and  mine  and  mill,  products  to  the  value  of  not  less  than 
$27,000,000,000.  Of  this  production,  we  sent  abroad  a  total  of 
$1,728,668,000  in  value.     Only  one  nation  sends  abroad  to  foreign 


302  NATIONAL     BUSINESS     CONGRESS 

markets  a  greater  total  than  we  export.  Four  nations  of  the  earth 
sell  to  others,  more  than  $1,000,000,000  worth  of  their  production. 
These  four,  with  their  respective  totals,  are: 

United  Kingdom   1,835,739,000 

United  States   1,728,668,000 

Germany    1,607,253,000 

France    1,017,487,000 

Of  the  vast  total  that  we  export,  about  $600,000,000  represents 
the  value  of  raw  unmanufactured  articles,  such  as  cotton  and  grain 
— the  balance  is  of  articles  that  we  have  manufactured.  The  manu- 
factured products  include  foodstufifs,  such  as  flour  and  prepared 
meats  and  other  manufactured  articles  such  as  machinery  and  the 
like.  With  the  constant  growth  of  our  population,  our  exports  of 
foodstufifs  are  continually  shrinking.  On  the  other  hand,  we  send 
abroad  increasing  quantities  of  other  manufactured  articles  like 
machinery. 

If  our  prosperity  is  to  continue,  we  must  develop  increasingly, 
our  foreign  trade.  The  reason  for  this  is  not  far  to  seek.  If  the 
vast  exports  of  the  past  year  had  been  thrown,  for  any  reason,  upon 
the  home  markets,  the  result  would  have  been  a  glut,  with  the  con- 
sequent failure  of  our  commercial  classes  and  vast  unemployment  of 
our  workers  in  every  line  of  activity. 

In  our  manufactured  products  we  are  able,  in  many  lines,  to 
produce  as  much  in  eight  months  as  the  home  markets  will  take  in 
twelve.  It  will  be  possible  to  keep  our  mills  open  and  active  only 
as  we  find  a  market  for  the  full  product  of  same.  This  is  why  our 
continued  prosperity  depends  upon  the  development  of  our  export 
trade,  particularly  in  manufactured  articles. 

OUR  OWN  SHIPPING  A  NECESSITY  TO  THE  MAINTENANCE 
OF  OUR  EXPORT  TRADE. 

If  we  are  to  safely  hold  our  export  trade,  and  still  more,  if  we 
are  to  develop  new  markets  in  other  countries,  we  must  have  our 
own  means  of  delivery.  It  is  well-known  that  no  store  trusts  to  a 
rival  concern  for  its  delivery  service.  Our  exports  are  almost 
wholly  delivered  in  ships.  If  we  are  to  make  these  deliveries  in  the 
face  of  the  trade  rivalry  of  other  nations,  we  must  control  the  ships 
by  which  we  send  our  products  abroad.  Other  nations  see  very 
clearly  the  necessity  of  maintaining  a  merchant  navy  if  a  foreign 
trade  is  to  be  secured  and  maintained. 


NATIONAL     BUSINESS     CONGRESS  303 

The  way  in  which  a  nation's  export  trade  is  vitally  connected 
with  its  merchant  marine  may  appear  from  one  or  two  illustrative 
examples.  A  few  years  ago,  in  fact  until  1907,  we  had,  plying  be- 
tween San  Francisco  and  Australasia,  three  American  ships  known 
as  the  Oceanic  Line.  They  made  regular  saihngs  from  San  Fran- 
cisco every  three  weeks  as  mail  and  passenger  and  cargo  steamers. 
The  last  year  these  boats  were  in  operation,  before  being  driven 
from  the  field  by  subsidized  Canadian  and  Japanese  competition, 
they  carried  from  the  port  of  San  Francisco  to  Australasia  $28,000,- 
000  worth  of  products.  Last  year,  in  the  absence  of  any  line  from 
San  Francisco  to  Australasia,  depending  exclusively  upon  tramp 
steamship  service,  our  exports  from  San  Francisco  shrank  to  a 
total  value  of  only  $2,000,000.  Formerly  we  had  an  extensive  mar- 
ket in  South  Africa.  This  market  has  been  seriously  impaired  be- 
cause a  line  of  mail  steamers,  subsidized  by  Canada,  and  plying  be- 
tween Montreal  and  South  African  ports,  has,  by  reason  of  govern- 
ment backing,  been  able  to  cut  on  New  York  rates  to  such  an  ex- 
tent as  to  divert  a  large  amount  of  trade  from  the  United  States  to 
Canada.  Freight  of  a  given  class,  which  pays  $6.70  per  ton  from 
New  York  to  Cape  Town,  is  taken  from  Montreal  to  the  same  port 
at  a  charge  of  $4.26.  It  is  not  necessary  to  give  other  instances, 
though  many  might  be  adduced. 

There  is  still  another  reason  why  it  is  necessary  for  us  to  have 
our  own  ships  if  we  are  to  be  secure  in  maintaining  our  export 
trade.  A  nation  lacking  its  own  merchant  marine,  depends  for  its 
facilities  for  delivering  its  foreign  trade  on  the  exigencies  of  inter- 
national politics.  Were  England  and  Germany,  for  example,  to 
engage  in  war  with  one  another,  those  powers,  in  the  prosecution  of 
such  a  war,  would  withdraw  from  their  merchant  navies  a  very  con- 
siderable proportion  of  the  tonnage  which  they  own.  In  the  recent 
Boer  war,  although  the  South  African  republics  possessed  neither 
battleship,  privateer  nor  merchantman,  England,  in  the  prosecution 
of  that  war,  and  incident  to  the  forwarding  and  supplying  of  her 
troops,  withdrew  from  her  merchant  marine  a  tonnage  of,  approxi- 
mately, one  million ;  262,000  tons  of  shipping  were  withdrawn  from 
the  lines  running  between  Great  Britain  and  Boston.  The  natural 
result  of  the  withdrawal  of  this  large  amount  of  shipping  from  over- 
sea trade,  was  a  sharp  rise  in  freight  rates,  amounting  in  many 
instances,  to  30%  and  over.  This  was,  as  one  can  readily  see,  in- 
jurious to  our  export  trade.     In  fact,  the  first  year  of  the  Boer  war, 


304  NATIONAL     BUSINESS     CONGRESS 

the  shrinkage  in  our  exports  and  foodstuffs,  amounted  to  $48,000,- 
000  as  against  the  figures  of  the  year  preceding,  and,  in  the  second 
year,  this  shrinkage  was  $67,000,000  as  by  the  same  comparison. 
Of  course,  this  shrinkage  was  largely  in  values  rather  than  volume, 
and  the  farmers  of  the  Middle  West,  receiving  less  for  their  prod- 
ucts than  they  otherwise  would  have  done,  helped  to  pay  the  cost  of 
the  Boer  war. 

In  case  of  a  Titanic  conflict,  such  as  that  between  Great  Britain 
and  Germany  would  be,  our  foreign  trade  would  suffer  an  almost 
absolute  stoppage,  with  resultant  panic  and  disaster  to  our  other 
national  commercial  interests,  for  England  and  Germany  together 
carry  a  total  of  80%  of  our  export  trade,  and  in  case  of  war  it  would 
be  necessary  for  them  to  at  once  sacrifice  this  business  at  our  own 
great  cost. 

During  the  Napoleonic  wars,  when  almost  all  of  Europe  was 
embroiled,  as  a  result  of  the  shipping  policies  pursued  by  our 
fathers,  we  had  developed  a  vast  merchant  navy  of  our  own,  and 
not  only  was  our  foreign  trade  secure,  notwithstanding  the  violent 
conflagration  raging  over  nearly  all  of  Europe,  but  as  the  most 
important  neutral  carrier,  the  conflict  actually  proved  to  our  com- 
mercial advantage. 

THE  SITUATION  THAT  CONFRONTS  US. 

"It  is  not  a  theory"  as  one  has  put  it.  "But  a  situation  that  con- 
fronts us,"  and  my  purpose  today  is  to  open  your  eyes  to  the  real 
gravity  of  the  outlook.  During  the  past  one  hundred  years,  since 
1810,  our  foreign  trade  has  increased  fifteen-fold.  At  the  first  date, 
we  carried  91.5%  of  our  foreign  trade  in  our  own  bottoms.  We 
had  an  over-sea  tonnage  at  that  time  of  981,019;  today,  after  the 
lapse  of  one  hundred  years,  we  carry  about  8%  of  our  foreign  trade 
in  American  ships  and  our  tonnage  is  less  in  amount,  by  more  than 
100,000  tons,  than  it  was  a  century  ago ;  and  this  does  not  tell  the 
whole  story,  for  only  a  small  percentage  of  our  present  registered 
tonnage  is  modern  and  engaged  in  actual  service. 

Admiral  Robley  D.  Evans  states  that  the  most  remarkable  thing 
observed  in  connection  with  his  voyage  while  in  command  of  the 
fleet,  was  the  absence  of  our  flag  from  the  great  ports  of  the  world 
visited  by  that  fleet. 

An  English  naval  ofllicer  last  season  was  riding  along  the  water- 
front of  Liverpool  in  an  electric  train,  when,  looking  out  of  the 


NATIONAL    BUSINESS    CONGRESS  .105 


witulow,  he  saw  tlutterini;  t'ldiii  the  i)eak  of  a  \  csscl  in  the  harhor. 
our  national  lianner.  The  sit^ht  was  so  novel  that  at  th.e  next  station 
he  left  tlie  train  and  walked  hack  one-half  mile  to  make  an  investi- 
gation. Asking  the  liarlior  master  how  often  he  docked  vessels 
flying  that  flag,  he  was  answered  tliat  altliongh  lie  liad  Iietn  harhor 
master  for  twelve  years,  this  ship,  a  sciuare  rigged  vessel,  was  the 
first  ll\ing  the  American  flag  which  he  had  ever  assigned  to  a  harhor 
herth. 

Prof.  John  C".  I'reeman,  oi  the  Universit}-  of  Wisconsin,  on  a 
recent  visit  to  Cojienhagen,  the  greatest  ])ort  f)f  the  lUdtic,  inquired 
of  the  i)ort  antlioritics  how  often  .American  vessels  were  seen  in 
those  waters.  In  answer  lie  was  told  that  the  last  American  mer- 
chant ship  to  visit  Copenhagen,  was  some  eighteen  years  since,  dur- 
ing the  administration  of  Grover  Cleveland. 

One  more  instance  will  illustrate,  perhaps,  more  fully  than  any 
other,  our  shameful  condition.  When,  a  few  years  ago.  the  Talma 
administration  collaj)sed  in  Cuha,  it  hecame  necessary  for  tliis  gov- 
ernment to  send  to  the  island  a  few^  thousand  troops  for  the  purpose 
of  restoring  order.  We  sent  our  "Tioys  in  lUue,"  not  upon  ships 
flving  our  own  flag,  hut  ])er force  upon  vessels  flying  the  meteor 
flag  of  Creat  Itritain. 

HISTORY. 

Patrick  Henry  once  remarked:  "I  know  of  no  way  of  judging 
of  the  future,  hut  hy  tlie  ])ast."  In  other  words,  "Hind-sight  is 
hetter  than  foresight."  Let  us  look  hack  a  little  and  see  what  we 
mav  learn  from  oiu'  maritime  experience  in  the  ])ast,  and  judge  to 
what  extent  we  may  he  guided  thereh_\-  in  our  ])lans  for  the  tutm-e. 

A  PERIOD  OF  DISCRIMINATING  DUTIES  AND  TONNAGE 

TAXES. 

When  the  Washington  administration  came  into  power  on 
March  4,  1789,  a  situation  very  similar  to  that  now  existing,  con- 
fronted our  peoi)le.  ( )ur  total  over-sea  tonnage  amounted  to  hut 
123,893,  and  of  our  foreign  trade  77A'/(  was  carried  in  the  ships  of 
other  powers.  One  of  the  first  concerns  of  the  new  administration 
was  to  remedy  this  intolerahle  situation.  C])on  the  meeting  of  the 
first  Congress,  a  petition  was  jjresented  from  the  merchants  and 
ship  ow^ners  of  I'altimorc,  running  in  part  as  follows:  "Your  peti- 
tioners, on  whichever  side  they  may  turn  their  eyes,  see  reason  to 
helicve  that  the  I'nited  States  may  soon  l)ecome  as  ])owerful  in  shi])- 


306  NATIONAL     BUSINESS     CONGRESS 

ping  as  any  nation  in  tlie  world.  *  *  *  Permit  ns  to  add  that 
for  want  of  national  protection  and  encouragement,  our  shipping, 
that  great  source  of  strength  and  riches,  has  fallen  into  decay  and 
involved  thousands  in  the  utmost  distress." 

In  response  to  this  and  similar  appeals,  on  July  4,  1789,  the  tirst 
Independence  Day  of  the  new  nation.  Congress  enacted  a  law  impos- 
ing discriminating  duties  and  discriminating  tonnage  taxes  in  the 
interest  of  the  protection  and  promotion  of  our  own  merchant 
marine.  The  discriminating  duties  ranged  from  10%  and  upwards 
in  favor  of  imports  carried  in  American  ships.  The  discriminating 
tonnage  tax  made  all  foreign  vessels  pay  a  tax  of  50c  per  ton  gross 
on  each  entry,  while  American  vessels  paid  a  tonnage  tax  of  6c  per 
annum. 

The  result  of  this,  and  other  similar  measures,  may  he  seen  from 
the  public  records.  I  will  only  say  that  by  the  year  1800,  eleven 
years  after  the  enactment  of  this  measure,  our  foreign  tonnage  had 
increased  more  than  five-fold,  totaling  667,107,  and  the  proportion 
of  foreign  trade  carried  in  our  own  vessels  had  grown  to  89%.  Ten 
years  later,  our  foreign  tonnage  had  increased  to  981,019,  and  we 
were  carrying  in  our  own  ships  91.5%  of  our  foreign  trade.  The 
wisdom  of  this  early  policy  thus  was  amply  evident.  However, 
shortly  after  this  the  War  of  1812  came  on.  In  1815,  at  the  con- 
clusion of  this  conflict,  we  abandoned  our  discriminatory  policy, 
and  beginning  first  with  Great  Britain  and  later  with  the  other 
ix)wers,  we  entered  into  reciprocal  arrangements  under  which  we 
agreed  not  to  impose  either  discriminating  duties  or  tonnage  taxes 
upon  the  ships  of  other  nations. 

What  was  the  result  of  this  abandonment  of  our  early  policy  ? 
The  figures  tell  the  tale.  In  1820  our  over-sea  tonnage  had  declined 
to  a  total  of  583,657,  and  by  the  close  of  another  decade,  by  1830, 
the  total  was  only  537,563.  After  this  American  enterprise  began  to 
make  itself  felt  in  spite  of  the  lack  of  adequate  government  assist- 
ance, and  by  1840  our  over-sea  tonnage  showed  a  total  of  762,838. 
By  1845  we  had  nearly  regained  the  figures  of  1810,  the  total  ton- 
nage then  amounting  to  904,476. 

THE  GREAT  PERIOD  OF  AMERICAN  MARITIME  EXPANSION. 

In  the  decade  between  1845  and  1855,  we  witness  the  greatest 
growth  that  our  merchant  navy  has  ever  known.  In  that  single  dec- 
ade  our   merchant   tonnage   engaged   in   over-sea   traffic   increased 


NATIONAL     BUSINESS     CONGRESS  307 

nearly  three-fold,  or  from  a  total  of  904,476  in  1845,  to  2,348,358  in 
1855.  This  is  of  itself  a  long  story  and  we  can  sketch  in  only  a  few 
items  of  the  total. 

In  the  later  thirties,  American  ingenuity,  enterprise  and  skill 
had  produced  sailing  vessels  which  were  showing  a  "clean  pair  of 
heels"  to  anything  that  British  dock  yards  could  launch.  The  result 
w^as  that  our  ocean  carriers  were  securing  the  cream  of  the  over-sea 
carrying  trade.  We  had  been  the  pioneers  in  steam  construction, 
the  first  steamboat  having  been  launched,  as  we  all  know,  in  Ameri- 
can waters.  In  1838  our  coastwise  steam  tonnage  was  nearly  three 
times  as  extensive  as  that  of  Great  Britain.  I5ut  at  that  time,  Great 
Britain,  seeing  that  she  was  distanced  in  the  sailing  competition,  re- 
sorted to  steam  and  began  her  policy  of  subsidizing  ocean  mail 
steamers,  under  which  she  has  since  expended  more  than  $300,000,- 
000  and  which  has  resulted  in  giving  her  some  thirty  lines  of  great 
mail  steamers,  which  run  from  England  to  every  quarter  of  the 
globe. 

In  1839  England  engaged  with  Samuel  Cunard  and  his  asso- 
ciates to  pay  toward  the  maintenance  of  the  steamers  known  as  The 
Cunard  Line,  a  subsidy  of  $425,000  annually.  This  was  about  25% 
of  the  estimated  running  cost  and  the  amount  which  was  deemed 
necessary  in  order  to  put  these  steamers  on  the  same  financial  basis 
as  sailing  vessels.  Our  seamen  at  first  laughed  at  the  hnnbering 
steamers,  and  in  fact  in  many  cases,  our  crack  sailing  craft  could 
outrun  them.  The  Palestine,  of  the  Morgan  Line,  to  London  on 
one  occasion  landed  her  passengers  at  Portsmouth  in  fourteen  days 
from  New  York,  squarely  beating  the  Cunard  steamer,  sailing  at  the 
same  time,  and  on  her  first  homeward  voyage  from  Liverpool  to 
New  York,  the  Dreadnaught,  clipper  ship,  reached  Sandy  Hook 
just  as  the  Cunard  steamer  Canada,  which  had  started  one  day 
ahead  of  her,  reached  Boston.  But  the  steamer  had  come  to  stay 
and  by  1845  it  became  apparent  to  our  shipping  interests,  and  even 
to  our  national  government,  that  if  we  were  to  maintain  our  place 
in  over-sea  commerce,  we  must  follow  England's  lead  and  subsidize 
steamship  lines.  The  only  trouble  was  that  we  were  about  five 
years  too  late. 

In  the  year  mentioned,  we  passed  an  Ocean  Mail  bill,  known  as 
The  Tyler  Act.  It  was  not  a  party  measure,  but  was  non-partisan 
in  its  character.  Among  its  advocates  were  such  men  as  the  Demo- 
cratic Senator  Thomas  Butler  King,  of  Georgia,  who  said  in  advo- 


308  NATIONAL     BUSINESS     CONGRESS 

c«icy  of  this  measure:  "It  is  sufticient  to  show  that  they  (I^ritish 
statesmen)  arc  resolved,  as  far  as  practioahle.  to  monopoHze  the 
intercourse  hetween  these  two  important  points.  This  movement 
sliows  clearlv  tliat  the  time  has  arrived  when  we  must  decide 
whether  we  will  yield  this  essential  hranch  of  navigation,  or 
whetlicr  we  shall  promptly  extend  to  our  enterprising  merchants,  the 
necessary  means  to  enable  them  to  bring  American  energy,  enter- 
prise and  skill  to  the  successful  competition  with  Uritish  sagacity 
and  capital." 

Two  years  later,  in  advocating  the  strengthening  of  this  same 
measure.  President  Polk,  in  his  annual  message  to  Congress,  said : 
"The  enlightened  policy  by  which  a  rapid  communication  with  the 
various  distant  parts  of  the  world  is  established  by  means  of  Ameri- 
can built  steamers,  would  find  an  ample  reward  in  the  increase  of 
our  commerce  and  in  making  our  country  and  its  resources  more 
favorably  known  abroad.  But  the  national  advantage  is  still  greater 
— by  having  our  naval  officers  made  familiar  with  steam  navigation 
and  of  having  the  privilege  of  taking  ships  already  equipped  for  im- 
mediate service,  at  a  moment's  notice,  and  will  be  cheaply  furnished 
bv  the  compensation  to  be  made  by  the  transportation  of  the  mail 
over  and  above  the  postage  received." 

As  a  result  of  this  policy  of  subsidies,  our  steamship  lines  multi- 
plied upon  every  over-sea  route.  Perhaps  the  most  notable  develop- 
ment was  that  of  the  Collins  Line  between  Xew  York  and  Liver- 
pool. The  vessels  of  this  line  speedily  distanced  everything  that  the 
English  had  afloat.  Xot  only  did  they  gain  all  the  records,  but  they 
forced  trans-Atlantic  freights  down  from  $35  a  ton  to  $20  a  ton. 
The  last  and  greatest  of  these  steamers,  the  Adriatic,  held  all  speed 
records  long  after  the  abandonment  of  our  enlightened  policy  had 
driven  this  and  other  lines  into  liquidation,  and  had  led  to  this  ves- 
sel's transfer  under  the  English  flag. 

These  boats  of  the  Collins  Line  received,  substantially  the  same 
compensation  received  by  the  Cunard  Line,  although  they  averaged 
practically  two  days  less  in  crossing  the  Atlantic  than  did  the  latter, 
and  thus  not  only  furnished  better  service,  but  added  to  our  com- 
mercial and  national  prestige.  The  Cunard  Company,  appealing  to 
the  British  government  for  more  assistance,  had  its  subsidy  ad- 
vanced to  $856,871  per  annum.  We  followed  suit,  and  in  1852  in- 
creased the  Collins  subsidy  to  $850,000  annually.  Great  Britain 
then  desisted,  seeing  that  we  were  willing  to  match  her  payments. 


NATIONAL     BUSINESS     CONGRESS  309 

Had  we  resolutcl\'  ])ursueil  tlu>  ])()licv  down  to  date.  \vitli(nit  any 
question,  instead  of  Britannia  iulin<,^  the  wave  as  slic  does  at  the 
present  time.  Colunihia  would  he  emj^ress  of  the  waters. 

The  wise  men  of  that  time  saw  the  value  of  a  policy  of  generous 
steamship  subsidies.  Senator  IJayard  of  Delaware,  in  debating  the 
proposed  addition  to  the  Collins  T.ine  subsidy,  said:  "I  am  willing 
to  trust  American  skill  and  industry  in  competition  with  any  people 
on  the  globe  when  they  stand  nation  to  nation,  without  government 
interference,  but  if  the  treasury  of  a  foreign  nation  is  poured  into 
the  lap  of  individuals  for  the  purpose  of  destroying  the  interests  of 
my  covmtry,  or  for  l)uilding  uj)  a  commercial  marine  at  the  expense 
of  the  commerce  and  prosperity  of  the  United  States,  f.  for  one, 
will  count  no  cost  in  countervailing  such  governmental  action  on 
the  part  of  Great  I'ritain,  or  any  foreign  power." 

Senator  Shields  of  Illinois  declared  that  "It  was  impossible  for 
American  private  enterprise  to  succeed  against  private  British  enter- 
prise backed  by  the  money  and  energy  of  the  British  government." 

However,  about  this  time  the  War  of  the  Sections  was  drawing 
on  and  the  question  of  subsidizing  our  merchant  marine  became  a 
partisan  issue.  The  result  was  the  final  abandonment  of  the  policy 
which,  in  ten  years,  had  wrought  such  marvelous  results,  and  the 
cessation  of  the  growth  of  our  merchant  navy,  for.  in  the  five  years 
elapsing  between  1855  and  1860.  we  added  to  our  marine  tonnage 
scarcely  an  increase  of  30,000  tons. 

During  the  Civil  War  and  as  a  result  of  the  same,  we  lost  ap- 
proximately 1.000,000  tons  of  shipping.  200,000  of  which  were 
destroyed  by  the  Anglo-Confederate  cruisers  and  the  balance  of 
which  were  passed  by  sale  under  the  flags  of  other  nations. 

Had  we,  after  the  war,  resumed  the  policy  which  we  had  aban- 
doned ten  years  previously,  even  then  it  would  not  have  been  too 
late  for  us  to  regain  our  lost  glory.  Nothing,  however,  has  been 
done  since  that  time,  .save  occasionally,  as  in  1891,  in  a  half-hearted 
and  faltering  way.  The  result  has  been  the  continued  decline  of  our 
merchant  marine  from  1855  practically  until  the  present  year  of 
grace,  fifty-five  years  later. 

PATRIOTIC  CONSIDERATIONS. 

But  this  is  not  simply  a  matter  of  commerce  and  of  dollars  and 
cents^t  is  a  matter  of  the  gravest  national  concern,  and  calculated 
to  profoundly  move  either  party.     Our  lack  of  an  adequate  mer- 


310  NATIONAL    BUSINESS     CONGRESS 

chant  marine  leaves  us  practically  helpless  and  defenseless  against 
an  aggressive  and  vij^orous  foreign  foe.  We  boast  of  our  mighty 
navy,  but  the  Naval  Hoard  will  tell  you  that,  through  lack  of  a  mer- 
chant marine  to  supply  the  necessary  colliers  and  auxiliaries,  it  could 
not,  on  a  sudden  call,  develop  10%  of  its  rated  efificiency. 

How  helpless  we  are  was  shown  at  the  time  President  Roose- 
velt sent  our  fleet  around  the  world.  Napoleon  used  to  say  that 
"an  army  fights  on  its  belly."  In  other  words,  that  without  an  ade- 
quate Commissary  Department,  the  best  military  force  would 
speedily  fade  away  and  disappear.  It  is  equally  true  that  a  battle 
fleet  sails  and  fights  upon  its  coal  bunkers ;  but  when  we  came  to 
send  our  fleet  around  the  world,  it  was  necessary  to  charter  twenty- 
seven  colliers  to  convey  the  coal  for  these  bunkers.  Lacking  vessels 
of  our  own,  we  were  compelled  to  go  afield  and  hire  vessels  belong- 
ing to  other  nations.  Had  a  solitary  shot  been  fired  during  the  prog- 
ress of  this  armada  around  the  globe,  under  international  law  every 
one  of  those  colliers  would  have  been  obliged  to  sail  away  and  desert 
our  fleet,  possibly  in  mid-Pacific,  leaving  those  mighty  vessels  to 
their  fate,  derelicts,  as  helpless  as  "painted  ships  upon  a  painted 
ocean." 

Japan,  as  the  result  of  an  enlightened  and  aggressive  policy  of 
subsidies,  has  developed  within  the  last  ten  years,  a  fleet  of  no  less 
than  206  mighty  merchant  steamers,  not  one  of  which  registers  a 
tonnage  of  less  than  2,000.  What  this  means  to  us  may  be  gathered 
from  the  recent  remarks  of  Major-General  J.  P.  Story,  U.  S.  A., 
who  writes :  "Japan  has  now  supremacy  in  the  Pacific.  In  the 
event  of  war,  that  supremacy  could  not  be  challenged  until  we  had 
constructed  a  sufficient  fleet  of  colliers.  Japan  can,  within  three 
months,  land  on  the  Pacific  coast  400,000  troops  and  seize,  with  only 
insignificant  resistance,  Seattle,  Portland,  San  Francisco  and  Los 
Angeles.  A  barrier  of  mountains  and  deserts  makes  the  defense 
of  the  Pacific  slope  an  easy  matter  against  an  attack  from  the  East, 
and  only  from  that  direction  could  the  United  States  hope  to  recap- 
ture its  lost  territory." 

Why  was  it  that  Mr.  Roosevelt,  who  is  not  fond  of  "eating 
humble  pie,"  readily  partook  of  a  diet  of  that  description  at  the  invi- 
tation of  the  Mikado  in  the  matter  of  the  San  Francisco  public 
school  issue?  If  you  or  I  went  journeying  to  Tokio,  we  would  find 
that  on  arriving  there  we  would  be  assigned  to  lodgings  in  the  for- 
eign quarter,  as  all  foreigners  are  under  the  police  regulations  of 


NATIONAL     BUSINESS     CONGRESS  311 


that  city  and  govcniiiiciit.  lUit  when  in  San  iM-ancisco,  the  San  Fran- 
cisco Scliool  Uoard.  on  llnding  that  a  number  of  Japanese  young 
men  desired  to  learn  luighsh.  and  thinking  it  better  for  all  concerned 
that,  instead  of  sitting  with  our  boys  and  girls  in  the  primary  grades, 
they  should  be  assigned  for  instruction  to  separate  schools  for 
Asiatics,  the  Japanese  government  took  umbrage,  and  under  the 
"Most  favored  nation"  clause  in  the  treaty  existing  between  us  and 
that  nation,  demanded  that  their  young  men  should  attend  school 
when  and  where  they  pleasetl,  regardless  of  the  perfectly  proper  and 
reasonable  regulations  made  by  the  School  Board  of  the  aforemen- 
tioned city,  what  was  the  action  of  our  government  in  the  situation? 
A  perfectly  proper  course  would  have  been  to  have  told  the  Mikado 
that  if  he  would  mind  his  own  business,  as  we  were  perfectly  satis- 
fied that  he  should  do.  we  would  attend  to  our  own  affairs  without 
soliciting  his  advice.  Instead,  however,  of  taking  this  position, 
President  Roosevelt,  finding  on  inquiry  from  the  Army  and  Navy 
Departments,  that  we  were  in  no  position  to  call  the  Japanese 
"bluff,"  promptly  stepped  up  to  the  counter  and  consumed  a  dish 
of  crow. 

I  hardly  think  that  the  Japanese  would  have  gone  to  the  extent 
of  fighting  over  the  question,  but  the  Mikado  had  a  giui  and  had  the 
drop  on  our  Teddy,  and  our  Teddy,  like  a  wise  man,  promptly  held 
up  his  hands.  But  is  it  flattering  to  our  national  pride  or  in  con- 
.sonance  with  our  national  safety,  to  allow  a  situation  under  which 
we  are  exposed  to  insult  and  offensive  aggression? 

PANAMA  CANAL.- 

At  vast  expense,  totalling,  perhaps,  in  the  neighborhood  of 
$500,000,000,  we  are  engaged  in  constructing  the  Panama  Canal,  one 
of  the  wonders  of  the  world.  It  will  make  the  entire  west  coast  of 
South  America  accessible  to  modern  enterprise  and  development. 
The  result  will  be  that  almost  immediately  on  the  opening  of  the 
Canal,  the  whole  west  coast  of  the  continent  to  our  south,  will  ex- 
perience such  a  development  as  the  world  has  probably  never  known. 
There  will  be  an  immense  demand  for  machinery,  for  every  variety 
of  manufactured  ])roduct  and  of  those  articles  that  we  can  most 
readily  and  naturally  supply;  but  the  English  and  (Germans  own  the 
ships,  and,  unquestionably,  those  ships  will  be  used  to  advance  their 
ov^^n  commercial  interests  and  to  secure  for  themselves  the  lion's 
share  of  this  rich  trade.     We  appear  to  be  engaged  in  the  most  tre- 


312  NATIONAL     BUSINESS     CONGRESS 

iiicikIous  altruistic  project  ever  known  to  man.  We  seem  to  be 
building  tliis  magnificent  work  in  tlie  interests  of  our  commercial 
enemies  and  trade  rivals.  1  lad  we  ships  to  sail  through  this  water- 
way, our  (lulf  cities  in  particular,  and  in  a  less  measure,  the  rest  of 
our  land,  woidd  experience  a  marvelous  development  of  industry 
and  commercial  activity  as  a  result  of  the  trade  opportunities  on  the 
west  coast  referred  to.  Lacking  an  adecjuate  merchant  marine,  it 
looks  as  though  we  would  be  compelled  to  keep  in  the  rear  and  be 
satisfied  with  a  few  crumbs  swept  from  our  competitors'  table. 

WHAT  SHALL  BE  THE  REMEDY?     SHALL  WE  TRY 
DISCRIMINATION? 

There  are  those  who  suggest  returning  to  the  policy  of  our 
fathers  and  imposing  discriminating  duties  on  imports  in  foreign 
bottoms  and  discriminating  tonnage  taxes  against  foreign  ships. 
Now,  while  we  are  aware  that  this  policy  worked  marvelously 
during  the  first  twenty  years  of  this  government,  we  are  equally 
sure  that  it  is  a  policy  that  could  not  be  applied  in  the  present  exi- 
gency. We  have  displomatic  engagements  with  a  score  and  more  of 
the  other  nations  df  the  world,  which  would  prevent  this  discrimina- 
tion, unless  we  first  abrogated  these  arrangements.  Some  have  sug- 
gested that  this  be  done,  alleging  that  in  order  to  secure  an  omelet, 
it  is  necessary  to  break  a  few  eggs.  Discriminations,  how^ever,  are 
of  more  than  doubtful  value.  France,  in  1872,  tried  this  policy  of 
discrimination.  President  Grant  of  this  country,  promptly  issued 
a  proclamation  of  retaliation  in  wdiich  he  was  joined  by  practically 
all  the  powers  of  the  world.  The  result  was  that  after  a  year's 
experience,  France  abandoned  the  policy  of  discrimination  as  im- 
practicable. 

A  similar  policy  engaged  in  by  the  United  States,  would,  at 
once,  provoke  world-wide  retaliation  and  we  should  be  worse  off 
than  we  now  are. 

SHALL  THE  REMEDY  BE  FREE  SHIPS? 

We  have  those,  on  the  other  hand,  who  believe  that  if  we  re- 
pealed our  Navigation  Acts,  and  admitted  to  free  registry  ships 
built  by  other  nations,  our  own  merchant  marine  would  speedily 
be  replenished.  However,  those  advocates  leave  out  of  sight  several 
things.  ]\Iost  of  all  they  leave  out  the  increased  cost  of  operating 
an  American  owned  shij).     The  buying  of  cheap  ships  would  not 


NATIONAL     BUSINESS     CONGRESS  313 

provide  us  with  cheap  labor  with  which  to  man  them.  Then  still 
further,  the  ships  of  other  nations,  particularly  those  belonging  to 
the  most  efficient  class,  almost  without  exception,  are  in  receipt  of 
generous  governmental  aid.  Of  the  three  hundred  or  more  20-knot 
steamers  plying  upon  the  various  trade  routes  of  the  world,  scarcely 
one  does  not  receive  a  government  subvention.  If  we  simply  offered 
to  allow  our  merchants  to  buy  ships  freely  in  every  market,  there 
is  not  the  slightest  reason  to  suppose  that  any  advantage  whatever 
would  be  taken  of  such  an  opportunity.  In  fact,  within  recent  years 
a  number  of  the  steamers  that  we  already  owned  have  been  trans- 
ferred from  our  flag  to  other  flags  because  of  the  increasing  cheap- 
ness of  operation  resulting  therefrom.  The  steamers  of  the  Red 
Star  Line,  the  Finland,  Kroonland  and  Samland,  have  only  within 
the  last  year  or  two  been  put  under  the  Belgian  flag  for  the  reason 
mentioned,  although  they  already  enjoyed  the  doubtful  advantage  of 
American  registry. 

SUBSIDIES. 

We  now  come  to  the  remedy  which  is  employed  extensively  by 
almost  every  nation  on  earth,  save  our  own — the  provision  of  special 
bounties  or  subventions  for  the  development  of  a  national  merchant 
marine.  Some  seem  to  be  afraid  of  the  word  "subsidy."  Allow 
me  to  quote  from  Mr.  Justice  ^Miller  of  the  Supreme  Court,  on  this 
question.  He  says :  "Bounties  granted  by  a  government  are  never 
pure  donations,  but  are  allowed  either  in  consideration  of  services 
rendered,  or  to  be  rendered,  objects  of  interest  to  be  obtained,  pro- 
ductions or  manufactures  to  be  stimulated,  or  moral  obligations  to 
be  recognized."  In  other  words,  subsidies  are  granted  to  subserve 
some  public  need,  or  to  advance  some  public  interest.  The  pro- 
posed shipping  subsidies  are  not  exclusively  in  the  interests  of  a 
class,  still  less  in  the  interests  of  any  individuals  of  a  given  class. 
They  are  in  the  interests  of  the  peace  and  prosperity  of  the  entire 
people. 

Our  "Sir.  John  D.  Long  in  debating  the  question  of  ship  subsi- 
dies before  the  Pittsburg  Chamber  of  Commerce,  was  answered  by 
his  opponent,  the  editor  of  the  Johnstown  Democrat,  with  the  state- 
ment that  he,  the  editor  in  question,  was  opposed  to  the  principle  of 
taking  money  out  of  one  man's  pocket  for  the  benefit  of  another 
man.  Now  this  sounds  very  platitudinous  and  self-evident,  but  in 
the  city  where  I  reside,  we  have  certain  avenues  where  you  will 
scarcely  find  a  baby  to  a  block,  but  where  the  property  is  assessed 


314  NATIONAL     BUSINESS     CONGRESS 

at  an  extremely  high  valuation,  and  the  owners,  in  consequence,  pay 
very  large  sums  in  taxes.  In  other  sections  of  this  same  city  we  have 
streets  where  for  block  succeeding  block  the  inhabitants  own  scarcely 
anything  else  but  babies  and  pay  no  taxes  to  the  city  at  all.  Yet 
we  take  this  money,  collected  from  the  men  who  have  no  children 
and  with  perfectly  clear  consciences,  spend  it  lavishly  in  building 
school  houses  and  paying  teachers  for  the  instruction  of  the  children 
of  the  parents  who  pay  no  taxes.  The  same  principle  applies  in 
every  other  field  of  human  government  and  activity,  and  the  wisdom 
of  the  subsidy  policy  is  shown  by  the  fact  that  the  leading  nations 
of  the  world  are  this  year  paying  out  in  postal  bounties,  admiralty 
subventions  and  other  forms  of  shipping  subsidy,  approximately, 
$50,000,000.  Canada  to  the  north  of  us,  is  maintaining  no  less  than 
ten  lines  of  ocean  mail  steamers  at  a  cost  to  the  Dominion  of  $1,- 
750,000.  This  is,  approximately,  2%  of  the  total  revenues  of  that 
government.  If  we  used  the  same  generosity,  we  would  be  expend- 
ing $20,000,000  a  year  for  this  purpose. 

I  herewith  give  you  the  totals  of  a  few  of  the  leading  powers, 
showing  what  they  are  expending  for  the  upbuilding  of  their  mer- 
chant navies: 

France    $13,423,737 

United  Kingdom  9,689,384 

Japan    5,413,700 

Italy    ••..••  3,872,917 

Spain   3,150,120 

Austria-Hungary    2,984,530 

Germany    -,301 ,0-9 

I  am  aware  that  many  statements  reflecting  on  a  subsidy  policy 
have  appeared  from  time  to  time  in  the  public  press.  During  the 
past  winter  there  were  no  less  than  four  circulars  issued  to  the 
American  public  opposing  subsidy  legislation.  They  were  issued 
anonymously,  except  in  the  last  instance,  and  in  this  last  case  we 
traced  the  article  in  question  to  the  agents  of  the  South  American 
shipping  pool.  These  same  people  in  the  investigation  conducted 
by  Congress  admitted  the  existence  of  a  South  American  Shipping 
Trust  and  the  payment  of  rebates  to  their  favored  patrons.  At  the 
same  time  it  was  admitted  by  them  that  their  publicity  was  secured 
through  their  advertising  channels,  showing  where  the  money  con- 
sideration came  in  in  connection  with  this  whole  situation.     It  is 


NATIONAL     BUSINESS     CONGRESS  315 

the  foreign  shipping  interests  which  have  systematically  sought  to 
becloud  our  American  intelligence  in  tliis  whole  matter. 

We  would  not  advocate  construction  bounties  such  as  are  given 
by  France,  Italy  and  Japan.  These  countries  have,  by  such  meas- 
ures, wonderfully  developed  their  merchant  navies,  France  in  the 
last  thirty  years  having  more  than  doubled  her  merchant  marine ; 
Italy  increased  hers  three-fold  and  over,  and  Japan,  since  1896, 
having  practically  created  a  modern  merchant  navy  now  aggregating 
nearly  1.500,000  tons.  The  last  named  nation  will  give  to  a  new 
steamer  $10  for  every  ton  of  her  registry,  $2.50  for  every  indicated 
horse  power  of  her  machinery.  A  boat  like  Tonyo  Mam  will  re- 
ceive, upon  completion,  a  bounty  of  $210,000.  However,  we  only 
ask  that  our  government  do  for  our  citizens  what  Great  Britain, 
Germany,  Spain,  Norway  and  other  powers  are  doing  for  theirs. 
Our  people  possess  enterprise  and  ability,  but  they  are  not  com- 
peting against  similar  enterprise  and  ability  in  foreign  nations,  but 
against  the  power  and  resources  of  foreign  governments  backing  up 
their  citizens,  and  unless  we  are  prepared  to  get  off  the  map,  we 
shall  have  to  take  similar  measures.  I  do  not  believe  that  the 
American  people,  once  the  facts  are  made  clear,  will  long  endure 
the  present  intolerable  state  of  affairs,  and  the  reason  why  the 
National  Association  of  Manufacturers  is  engaged  in  a  nation-wide 
campaign  in  the  interests  of  the  revival  of  the  American  merchant 
marine  is  because  we  believe  that  the  American  people  will  respond 
to  an  appeal,  based,  as  ours  is,  upon  business  and  patriotic  consider- 
ations. We  do  not  ask  for  partisan  action,  but  urge  all  parties  to 
unite  in  the  interests  of  the  public  weal  and  for  the  honor  of  our 
common  flag  in  taking  such  measures  as  will  restore  once  more  our 
banner  to  the  seas.  The  National  Association  of  Manufacturers 
feels  that  it  can  embark  upon  no  nobler  or  more  worthy  project 
than  advocating  at  the  bar  of  public  opinion  this  great  question, 
and  we  have 'every  reason  to  believe,  from  our  experience  in  every 
section  of  this  country,  that  the  public  response  will  be  emphatic 
and  that  in  the  near  future  Congress  will  be  compelled  by  the  voice 
of  the  people  to  give  us  a  subsidy  measure,  which  will  once  more 
allow  us  to  hold  up  our  heads  without  shame  before  the  nations  of 
the  world. 

Gentlemen,  I  thank  you  for  your  kindness.     (Applause.) 


316  NATIONAL     BUSINESS     CONGRESS 

The  Toastmaster:  Gentlemen,  our  good  friend,  Mr.  Rosen- 
thal, has  told  us  one  way  by  which  we  can  increase  the  export  trade 
of  our  country.  He  has  still  other  thoughts  on  that  subject,  and 
he  will  present  them  to  us  now.     (Applause.) 


HOW  TO  INCREASE  OUR  EXPORTS. 

Mr.  Benjamin  J.  Rosenthal:  Mr.  Chairman  and  gentle- 
men: The  very  lateness  of  the  hour  brings  to  my  mind  a  little 
story  which,  undoubtedly,  many  of  you  have  heard.  It  seems  that 
a  Chinaman  had  been  arrested  charged  with  stealing  a  dog.  He  had 
been  brought  before  the  court  and  owing  to  the  fact  that  he  could 
not  speak  English,  an  interpreter  was  employed,  and  the  examina- 
tion finally  resolved  itself  down  to  a  question  of  the  color  of  the 
dog.  One  of  the  counsel,  said  to  the  interpreter :  "Ask  the  China- 
man what  was  the  color  of  the  dog?"  The  interpreter  asked  the 
question  and  the  Chinaman  kept  talking  about  fifteen  minutes,  and 
finally  the  court  became  disgusted  and  turned  to  the  interpreter  and 
said:  "What  did  he  say  was  the  color  of  the  dog?"  The  inter- 
preter said:  "He  was  a  yellow  dog."  (Laughter.)  And  so,  gen- 
tlemen, I  could  say  in  three  words  almost  what  the  Chinaman  took 
a  half  hour  to  say,  and  could  give  you  the  gist  of  the  conversation, 
and,  because  of  the  lateness  of  the  hour,  I  feel  almost  inclined  to 
do  it. 

The  question  is,  how  to  get  foreign  business,  and  the  answer 
is:  "Go  after  it."  But  we  speakers  got  our  supper  for  nothing. 
You  paid  for  it,  and  one  of  the  conditions  was  that  we  would  have 
to  talk  for  it,  and,  therefore,  I  think  I  feel  obligated  to  the  National 
Business  Congress,  even  at  the  expense  of  keeping  you  here  to  hear 
me  talk  for  my  supper ;  besides  that,  they  paid  my  railroad  fare  here 
tonight.  I  came  from  Fifty-third  Street  on  the  Illinois  Central, 
and  I  have  to  talk  for  that.  Therefore,  I  am  going  to  try  to  keep 
you  here  as  briefly  as  possible,  but  I  might  also  add  that  I  missed 
my  train,  owing  to  the  lateness  of  the  hour,  and  I  cannot  get  out 
for  half  an  hour,  and  am  going  to  make  you  stay  if  you  will. 

The  subject  I  am  to  present  did  not  originate  with  me.  It  was 
promulgated  from  the  fertile  brain  of  the  late  Volney  W.  Foster, 
who  was  one  of  the  charter  members  of  the  National   Business 


NATIONAL     BUSINESS     CONGRESS  317 

League  of  America,  and  one  of  Chicago's  most  respected  and  dis- 
tinguished citizens.  He  passed  from  this  world  about  seven  years 
ago,  but  while  he  was  alive  he  discussed  the  subject  of  an  inter- 
national trade  court,  as  we  expressed  it,  at  various  times.  After 
his  death  I  decided,  because  I  was  deeply  interested,  that  I  would 
study  the  subject,  although  I  never  felt  and  do  not  feel  now  that 
I  could  do  the  subject  justice. 

Last  year  during  a  visit  abroad  I  made  careful  investigation 
of  the  industrial  conditions,  paying  special  attention  to  the  foreign 
labor,  and  comparing  it  with  the  labor  situation  at  home.  I  also 
made  a  comparison  with  the  organization,  system,  advertising,  en- 
ergy, and  everything  in  connection  with  the  industrial  system,  as 
well  as  a  study  of  the  needs  of  the  people  abroad,  so  as  to  ascertain, 
if  possible,  to  what  extent  we  might  profitably  supply  them.  I  ap- 
preciated at  the  time  that  it  was  a  big  undertaking,  but  I  endeav- 
ored to  cover  as  much  ground  as  possible,  and  the  result  of  my 
investigation  led  me  to  the  conclusion  that  England  and  the  con- 
tinent are  greatly  in  need  of  much  that  we  can  spare,  and  that  the 
opportunities  for  doing  a  large  business  abroad  are  practically  un- 
bounded. I  am  satisfied  that  the  reason  we  are  not  doing  a  much 
greater  export  business  is  either  the  lack  of  confidence  in  our 
ability  to  get  it,  or  our  indifference,  which  prevents  our  going  after 
it.  We  have  become  so  accustomed  to  swapping  dollars  amongst 
ourselves,  and  up  to  quite  recently  we  have  passed  through  such  a 
wonderful  commercial  expansion  in  our  own  country,  that  we  have 
almost,  except  in  a  few  lines,  overlooked  the  great  and  profitable 
foreign  business.  If  manufacturers  have  hesitated  to  go  after  the 
foreign  business  because  they  have  compared  the  scale  of  wages 
paid  workmen  abroad  with  our  own,  let  me  assure  them  from  a 
careful  observation  that  the  wage  scale  is  a  misnomer  and  cannot 
be  used  as  a  fair  basis  of  computation.  I  make  the  broad  general 
statement — and  I  have  no  fear  of  honest  contradiction — that  except 
in  the  case  of  a  few  special  lines  where  expert  or  special  workmen 
are  employed  in  trades,  that  I  might  call  inherited,  the  American 
workman  at  his  own  wage  can  produce  the  same  article  at  a  lower 
price  than  the  foreign  workman  at  his.  The  explanation  is  simple. 
Our  great  natural  resources,  our  skilled  labor,  our  boundless  energy, 
our  superior  working  conditions,  our  selling  and  advertising  genius, 
our  cost  system  and  our  up-to-date  machinery — these,  with  our 
prompt  cash  basis  of  trading,  make  a  combination  that  so  far  offsets 


318  NATIONAL     BUSINESS     CONGRESS 

the  so-called  cheap  labor,  that  1  am  convinced  the  statement  that 
I  make  ^that  we  can  produce  almost  anything  at  a  lower  price  than 
it  can  be  produced  abroad  can  be  fully  borne  out.  Does  any  one 
within  the  sound  of  my  voice  believe  that  men  and  women  with 
emaciated,  underfed  bodies,  working  under  miserable  conditions  at 
starvation  wages,  can  concentrate  that  physical  and  mental  force 
that  is  required  to  properly  produce  results  ?  This  in  a  large  meas- 
ure is  the  competition  the  American  manufacturer  is  confronted 
with,  and  I  am  not  drawing  upon  my  imagination  in  the  least  wdien 
I  make  this  statement.  Why,  when  you  see  strong,  able-bodied 
men  pulling  wagons  in  the  street  you  can  quickly  deduce  the  fact 
that  a  horse  is  considered  more  valuable  than  a  man,  according  to 
the  foreign  standard,  and  that  human  intelligence  counts  for  noth- 
ing. This  country  has  arrived  at  the  parting  of  the  ways.  It  must 
either  go  backward  or  go  forward.  It  must  find  places  for  the 
million  male  emigrants,  many  of  them  skilled  artisans,  coming,  to 
it  annually,  or  it  must  turn  them  back ;  and  with  our  abundant  and 
almost  unlimited  resources  we  will  not  do  the  latter,  I  am  sure. 

We  have  for  the  past  fifty  years  depended  upon  our  export  of 
food  stufifs,  but  even  to-day  this  situation  is  changed,  and  now  our 
exports  of  manufactures  exceed  our  exports  of  food  stuffs,  and 
as  our  population  increases  we  will  more  and  more  require  these 
food  stuflFs  to  supply  our  home  market.  Therefore,  there  is  but 
one  avenue  open,  the  industrial.  To-day  we  have  a  great  deal  of 
idle  labor  in  this  country,  and  there  is  absolutely  no  need  of  the 
existence  of  this  deplorable  condition.  It  is  true  that  the  demand 
at  home  is  not  sufficient  to  keep  this  labor  employed,  but  why  must 
we  depend  upon  home  consumption? 

Every  business  man  knows  that  the  cost  of  production  steadily 
decreases  in  a  properly  organized  factory  as  the  production  in- 
creases, so  that  if  we  can  operate  our  factories  to  their  fullest 
capacity  we  immediately  accomplish  two  beneficial  results :  First, 
we  reduce  the  cost  of  production,  thus  lowering  the  cost  of  living; 
and  second,  we  keep  labor  employed  at  good  wages ;  for  after  a 
specified  production  is  reached  the  overhead  increases  very  little, 
and  labor  can  be  better  paid  by  reason  of  the  increase  of  produc- 
tion and  still  the  cost  of  production  be  decreased.  Therefore,  if  I 
am  right — and  I  do  not  think  any  one  will  dispute  it,  for  to  in- 
crease our  output  is  what  we  are  all  straining  and  striving  to  ac- 
complish— then  the  only  difficulty  is  to  find  a  market  for  this  in- 


NA.TIONAL     BUSINESS     CONGRESS  319 

creased  output.  Advertising  has  been  successfully  resorted  to,  and 
sending  salesmen  into  new  territory  has  also  been  a  means  toward 
this  desired  end,  but  alzvays  in  America,  and  to-day  we  are  all  doing 
the  same  thing,  and  consequently  it  is  costing  us  more  to  do  business 
than  formerly. 

Now,  why  not  take  a  short  cut  to  prosperity?  I  claim  the 
foreign  route  is  the  one  that  is  the  least  covered  and  affords  by  far 
the  greatest  opportunities,  and  that  if  we  would  reverse  the  scheme 
of  shutting  down  valuable  plants  and  throwing  them  on  the  scrap 
heap  to  reduce  production,  or  combining  interests  and  reducing  the 
])roduction  to  meet  a  certain  demand,  and  agreeing  upon  a  j^rice  not 
governed  by  the  actual  cost  of  production,  but  by  a  so-called  gentle- 
men's agreement,  and  if  we  would  start  up  all  these  plants  that 
took  genius  and  time  to  build  up,  and  go  after  the  foreign  business, 
every  factory  would  be  so  busy  filling  orders  that  it  would  not  be 
necessary  to  agree  upon  prices  in  order  to  keep  some  factory  that 
was  }wt  busy  from  cutting  them. 

With  no  apparent  effort,  except  in  a  few  lines  that  have  built 
up  a  profitable  export  business,  we  gained  about  three  hundred  mil- 
lion dollars  in  our  exports  in  the  fiscal  year  1911  over  1910,  ex- 
porting in  1911  over  two  billion  dollars.  To  give  you  a  few  sta- 
tistics :  In  manufactures  ready  for  consumption  there  were 
exported  in  the  year  1901  a  little  over  three  hundred  million  dollars 
and  this  year  about  six  hundred  million  dollars.  In  boots  and  shoes 
in  1901  five  and  a  half  million  dollars,  and  this  year  thirteen  million 
seven  hundred  thousand  dollars.  In  builders'  hardware  and  tools, 
in  1901,  nine  million  dollars,  and  this  year  seventeen  million  dollars. 
"S'ou  may  consider  this  a  good  showing,  but  I  cannot  agree  with  you 
if  you  do,  for  the  opportunity  is  so  great  that  this  increase,  al- 
though large,  is  nothing  to  what  we  could  get  if  we  would  only  go 
after  it.  Now  this  increase  took  place  despite  the  fact  that  our 
wage  scale  was  so  much  higher. 

Plants  for  manufacturing  American  agricultural  machinery  are 
now  in  operation  in  foreign  countries.  These  plants,  of  course,  are 
owned  by  Americans,  yet  our  exports  of  American-made  mowers 
and  reapers  alone  last  year  were  greater  than  that  of  all  agricultural 
implements  ten  years  ago.  Ten  years  ago  we  exported  two  million 
dollars  of  plows  and  cultivators,  while  last  year  we  exported  nine 
million  dollars.  In  1902  we  exported  one  million  dollars  in  automo- 
biles, last  vear  thirteen  million  dollars.     In  the  last  fiscal  vear  the 


320  NATIONAL     BUSINESS     CONGRESS 

gain  in  this  line  alone  was  three  and  a  half  million  dollars.  Large 
increases  were  shown  in  the  export  of  photographic  goods,  mineral 
oils,  electrical  appliances  and  machinery,  typewriters,  sewing  ma- 
chines, cash  registers,  metal  working  machinery,  pipes  and  fittings, 
iron  and  steel  work.  Within  ten  years  the  export  of  copper  bars, 
pigs  and  ingots  has  increased  from  about  forty  million  dollars  to 
about  one  hunded  million  dollars.  All  this  in  spite  of  the  fact  that 
except  with  a  few  articles  there  is  still  a  tenacious  clinging  to  the 
home  market,  still  a  great  dif^dence  as  to  over-sea  commerce. 

A  great  deal  of  the  increase  of  our  export  business  is  due  to 
the  demand  that  has  been  created  abroad  by  Americans  living  over 
there  or  visiting  there,  and  through  advertising,  but  hardly  through 
any  great  effort  on  our  part. 

If  the  proper  efifort  were  put  forth  in  the  first  instance  to  se- 
cure foreign  trade,  there  would  be  no  necessity  for  holding  con- 
gresses, when  conditions  are  bad,  to  ascertain  the  causes  of  the 
depression.  Note  the  activity  of  the  foreign  exporters  since  the 
canal  we  are  digging  is  nearing  completion.  Germany  and  Eng- 
land especially  are  making  vast  preparations.  They  are  both  build- 
ing new  ships  to  put  on  that  route  as  soon  as  the  canal  is  opened, 
ships  of  double  and  treble  the  tonnage  of  those  now  in  use,  because 
they  realize  the  possibilities  of  the  situation,  and  they  know  that 
their  trade  will  largely  increase  when  we  finish  the  canal  which  it 
now  appears  we  are  building  for  their  benefit.  We  witness  all  these 
activities  to  steal  the  trade  right  under  our  very  noses,  and  do  not 
retaliate.  The  Germans,  the  English,  the  Erench  and  the  Belgians 
send  their  traveling  men  all  through  South  America  and  we  make 
no  efifort  to  compete  with  them,  but  continue  the  fight  for  trade  in 
North  America,  constantly  fighting  amongst  ourselves  and  cutting 
the  throats  of  our  own  manufacturers  instead  of  going  after  our 
competitors  from  across  the  sea.  Why,  the  European  buyers  have 
to  come  to  us  for  our  goods  instead  of  our  going  to  them,  and  this 
in  a  large  measure  is  responsible  for  our  increase  of  exports.  When- 
ever our  manufacturers  are  ready  to  go  after  the  foreign  trade  it 
will  not  be  difficult  to  compete  with  the  foreign  manufacturers  and 
sell  goods  right  at  their  very  doors.  But  we  must  do  more  than 
wait  for  the  buyers  to  come  to  us.  We  must  create  proper  banking 
facilities  and  establish  agencies  and  branch  houses  just  as  the  Euro- 
pean manufacturers  have  so  successfully  done. 


NATIONAL     BUSINESS     CONGRESS  321 


In  order  to  allay  any  possible  fear  in  your  minds  as  to  our 
facilities  for  securing  accurate  financial  reports  upon  which  to 
base  a  credit,  I  am  glad  to  be  able  to  state  that  the  commercial 
agencies  in  our  country  are  splendidly  equipped  for  this  service. 
One  of  them  has  seventy-one  branch  offices  abroad,  each  one  in 
charge  of  a  trained  American,  and  this  agency  supplied  3,112  re- 
ports to  America  this  year,  and  the  other  large  agency  is  affiliated 
with  the  most  reliable  agency  abroad,  so  that  both  of  these  concerns 
can  furnish  a  report  on  a  foreign  corporation  almost  as  quickly  as 
they  can  on  one  at  home,  and  equally  as  reliable.  These  agencies 
also  have  lists  of  importers  which  they  can  furnish  to  those  who 
are  interested  in  exporting,  so  that  these  lists  may  be  circularized, 
if  desired.  Another  matter  that  might  relieve  our  American  busi- 
ness men,  is  the  fact  that  the  percentage  of  solvency  abroad  is 
greater  than  in  America. 

The  percentage  of  exports  of  other  countries  in  proportion  to 
the  volume  of  their  manufactures  far  exceeds  that  of  the  United 
States,  even  with  our  vastly  increased  facilities.  In  a  report  of 
the  International  Harvester  Company  of  September  1st  of  this  year, 
the  President  says :  "The  total  volume  of  business  at  this  date  is 
slightly  in  excess  of  what  it  was  at  this  time  last  year.  The  foreign 
trade  show^s  a  substantial  increase."  Now  what  would  the  Inter- 
national Harvester  Company  do  without  its  foreign  business?  But 
if  you  go  abroad  and  note  the  efifort  that  it  makes  to  get  this  busi- 
ness and  the  way  it  is  handled,  you  would  not  wonder  at  its  vast- 
ness.  I  asked  a  manufacturer  of  typewriters  quite  recently  what 
per  cent  of  output  he  sold  abroad.  He  told  me  over  33  1-3  per  cent. 
He  said  his  company  would  not  know  what  to  do  if  they  lost  their 
foreign  business,  which  they  were  steadily  increasing.  He  also  told 
me  that  it  took  no  greater  effort  to  get  the  business  over  there  than 
in  this  country. 

Europe  needs  America  and  America  needs  Europe.  She  stands 
ready  to  take  our  surplus  and  pay  us  good  prices  for  it.  Why, 
many  things  that  we  produce  in  abundance  she  does  not  even  know 
we  have  for  sale ! 

To-day  w^e  sell  many  shoes  and  leather  specialties,  typewriters, 
kodaks,  graphophones,  sewing  machines,  razors,  drugs,  automobiles, 
farm  implements,  cotton  goods,  cash  registers,  pianos,  guns,  skates, 
fountain  pens,  bicycles,  corsets,  watches,  billiard  tables,  linotype 
and  printing  machines,  slot  machines,  hardware,  furniture,  filing  sys- 


322  NATIONAL     BUSINESS     CONGRESS 

terns,  lithographing  presses,  dynamos  and  electrical  apparatus,  en- 
gines, wagons,  trucks,  gas  fixtures,  cigars,  laundry  machinery,  fire 
extinguishers,  scales,  machine  tools,  vacuum  cleaners,  elevators,  pe- 
troleum tanks,  picture  frames  and  mouldings,  tin  goods,  rubber 
tires,  savings  banks,  surgical  supplies,  paints,  chemicals,  zinc,  rail- 
road cars,  dental  goods,  plumbing  supplies,  stoves,  iron  and  steel 
manufactures,  collars,  shirts,  ready-made  clothes,  whiskey  and  food 
stufiFs.  You  may  judge  from  this  list  what  a  variety  of  commodi- 
ties we  now  furnish  to  other  nations.  Still  in  most  of  these  lines 
the  surface  alone  has  been  scratched.  With  the  same  efifort  that  the 
manufacturers  of  these  goods  make  to  dispose  of  them  in  this 
coimtry,  they  can  double,  treble,  and  even  quadruple  the  business 
even  on  these  lines.  There  are  many  other  lines  that  we  export  in 
small  quantities  that  we  could  do  a  big  business  on  if  we  went  after 
it.  There  is  a  great  demand  for  American  made  goods,  and 
the  four  hundred  thousand  travelers  who  annually  go  to  Europe 
wearing  and  talking  about  our  manufactures  are  an  advertisement 
for  these  goods  that  is  more  effective  than  if  we  spent  millions  of 
dollars  in  magazine  and  newspaper  advertising  over  there.  And 
yet  we  do  not  follow  up  this  great  advantage.  It  is  not  very  long 
since  our  life  insurance  companies  went  after  the  foreign  business, 
and  what  is  the  result?  The  increase  abroad  is  phenomenal,  show- 
ing conclusively  that  when  Americans  go  after  business  in  the  right 
way,  it  is  not  difficult  to  get  it. 

I  think  I  have  already  dwelt  at  too  great  length  upon  the  neces- 
sity of  extending  our  over-sea  commerce.  I  believe  that  what  you 
would  like  to  know  is  what  I  propose  as  a  means  to  gain  this  end. 
I  propose  that  the  various  manufacturers  of  this  country  who  have 
anything  to  sell  that  can  be  exported  form  a  national  organization 
and  this  organization  select  as  a  general  manager  a  high-grade,  ex- 
perienced organizer.  After  he  has  gathered  together  all  the  manu- 
facturers who  will  join  this  movement,  he  can  then  proceed  to 
Paris,  where  I  am  sure  suitable  arrangements  can  be  made  for  a 
proper  site  for  a  series  of  buildings  for  permanent  exposition  pur- 
poses. From  the  investigation  I  made  abroad  the  government  of 
France  will,  I  am  sure,  welcome  such  an  organization,  and  I  believe 
that  all  goods  for  this  exhibit  would  be  admitted  free  of  duty  by 
France.  The  American  Chamber  of  Commerce  in  Paris,  a  repre- 
sentative organization  of  Americans  living  abroad,  would  aid  us  in 
this  movement,  and  their  support  would  be  of  material  help. 


NATIONAL     BUSINESS     CONGRESS  323 

The  next  move  would  be  the  leasing  of  such  space  as  would  be 
required  by  the  various  exhibitors  who  wish  to  engage  in  the  export 
trade.  This  space,  of  course,  could  be  leased  at  a  certain  square 
foot  rental  per  annum,  and  the  amount  realized  from  this  rental 
must,  of  course,  be  sufficient  not  only  to  maintain  the  exhibit  in  a 
proper  way,  but  to  leave  a  surplus  to  take  care  of  the  annual  retire- 
ment of  the  bonded  indebtedness  that  would  be  created  in  erecting 
the  required  buildings.  I  am  sure  that  the  demand  for  space  would 
far  exceed  the  supply.  But  in  order  to  demonstrate  whether  or  not 
my  theory  be  correct  no  obligation  need  be  entered  into  beyond  the 
employment  of  a  general  manager  until  it  were  fully  shown  that 
there  were  enough  manufacturers  to  form  an  organization  and  put 
up  the  money  to  erect  the  buildings  and  take  space  in  sufficient 
amount  to  defray  the  expense  of  maintenance  and  retirement  of 
the  bonds.  Space  could  be  leased  separately  or  jointly,  so  that  a 
small  exhibitor  of  any  size  could  be  accommodated.  Small  ex- 
hibitors could  also  join  with  others  in  the  division  of  the  expense 
of  a  traveling  man  or  representative  of  the  exhibit,  so  that  each 
exhibitor  would  have  a  representative.  Thus  it  would  not  be  merely 
an  exhibition,  but  an  organized  selling  campaign,  for  an  exhibit 
without  a  thoroughly  organized  selling  force  would  be  of  little  aid. 
We  already  have  such  an  exhibit  in  the  large  number  of  travelers 
who  go  abroad  wearing  and  talking  about  what  we  make  and  sell. 
American  manufacturers  who  already  have  a  selling  force  and 
agencies  abroad  would,  I  am  sure,  join  this  organization  gladly. 

The  reason  that  I  select  Paris  as  the  place  for  this  exhibit  is 
that  it  is  within  a  night's  ride  of  two  hundred  million  people.  Not 
only  do  many  of  these  people  visit  Paris,  but  almost  every  one  who 
goes  abroad  from  South  America  and  other  countries  visits  Paris, 
and  I  believe  it  is  unquestionably  a  fact  that  such  an  exhibit  in 
Paris  would  be  seen  by  more  people  than  if  it  were  located  in  an> 
other  city.  The  government  of  France  and  the  municipality  of 
Paris  do  much  to  attract  visitors  to  the  city.  Besides,  the  expense 
of  conducting  a  selling  campaign  would  be  less  from  Paris  than 
from  any  other  point,  as  Paris  is  nearer  the  center  of  population 
abroad.  I  think  it  would  cost  us  less  to  send  traveling  men  to  Paris 
and  then  have  them  travel  abroad  than  it  would  cost  to  send  them 
from  New  York  to  California.  A  man  traveling  from  Paris  could 
conveniently  and  at  a  small  expense  visit  France,  England,  Ger- 
many. Russia.  Belgium.  Spain  and  many  other  European  countries 


324  NATIONAL     BUSINESS     CONG  R  E  S  S 

which  are  large  consumers.  After  this  exhibit  is  successfully 
launched  a  like  exhibit  could  then  be  opened  at  Buenos  Ayres,  the 
capital  of  Argentina. 

I  will  not  attempt  to  work  out  the  details  of  this  plan.  There 
are  many  men  more  capable  of  doing  this,  but  I  only  want  to  add  in 
conclusion  that  the  war  from  to-day  on  is  not  one  of  armies  or 
navies,  but  one  of  commerce.  The  brains  of  the  country  will  be 
engaged  principally  in  commerce,  and  that  nation  which  is  the  lead- 
ing commercial  nation  will  be  the  greatest  nation  in  the  world.  We 
have  that  opportunity.  It  is  knocking  at  our  doors.  Will  we  close 
them,  or  will  we  open  them  wide  and  welcome  it  with  open  arms, 
and  never  rest  until  w^e  have  woven  a  commercial  belt  that  will 
extend  around  the  world  and  the  products  of  our  manufacturers 
be  found  in  every  household?  If  we  do  not  do  this,  other  nations 
will.  Manufacturers  of  America,  awake,  and  get  together,  and  let 
the  fires  of  industry  in  America  burn  so  brightly  that  the  rising 
smoke  and  flame  may  be  seen  plainly  from  every  corner  of  the 
civilized  world.  This  is  your  opportunity.  RISE  TO  IT!  (Ap- 
plause.) 


NATIONAL     BUSINESS     CONGRESS  325 


Accredited  Delegates  to  the  National  Business  Congress 


DEPARTMENT  OF  STATE— WASHINGTON. 
Honorable  John  Ball  Osborne. 

NATIONAL  ASSOCIATION  OF  MANUFACTURERS. 

William  L.  Brown,  Chicago.  Herbert  E.  Miles,  Racine,  Wis. 

J.  G.  Battelle,  Columbus,  Ohio.  Albert  H.  Mulliken,  Chicago. 

C.  S.  Brantingham,  Rockford,  111.  O.  H.  Morgan,  Chicago. 

J.  P.  Bird,  New  York  City.  A.  C.  Marshall,  Dayton,  Ohio 

George  S.  Boudinot,  New  York  City.  A.  Parker  Nevin,  New  York  City. 

J.  E.  Bullock,  Chicago.  D.  M.  Parry,  Indianapolis,  Ind. 

W.  H.  French,  Chicago.  Walter  B.  Pearson,  Chicago. 

Clarence  S.  Funk,  Chicago.  W.  E.  Ritchie,  Chicago. 

Irving  T.  Hartz,  Chicago.  T.  M.  Sechler,  Moline,  111. 

Charles  M.  Jarvis,  New  Britain,  Conn.  O.    H.    L.    Wernicke,    Grand    Rapids, 
L.  D.  Kellogg,  Chicago.  Mich. 

H.  H.  Lewis,  New  York  City.  John  Kirby,  Jr.,  Dayton,  Ohio. 
Charles     D.     Mitchell,     Chattanooga,   Tenn. 

NATIONAL  IMPLEMENT  AND  VEHICLE  ASSOCIATION. 

James  A.  Carr,  Richmond,  Ind.  Henry  M.  Wallis,  Racine,  Wis. 

F.  C.  Johnson,  Springfield,  Ohio.  H.  N.  Wade,  Batavia,  111. 

E.  W.   McCullough,   Chicago.  W.  H.  Stackhouse,  Springfield,  Ohio. 

THE  NATIONAL  BUSINESS  LEAGUE  OF  AMERICA. 

O.  B.  Bannister,  Muncie,  Ind.  A.  Hirshheimer,  La  Crosse,  Wis. 

H.  B.  Bannister,  Muncie,  Ind.  Dr.  Samuel  MacClintock,  Chicago. 

Charles  B.  Boothe,  Los  Angeles,  Cal.       Henry  M.  Wallis,  Racine,  Wis. 
Elliott  Durand,  Chicago.  Alexander  H.  Revell,  Chicago. 

E.  Allen  Frost,  Chicago.  H.  W.  Hoole,  Muncie,  Ind. 

NATIONAL  PAINT,  OIL  AND  VARNISH  ASSOCIATION. 

T.  L.  Sulzberger,  Chicago.  John  Von  Pein,  Chicago. 

George  E.  Watson,  Chicago. 

UNITED  STATES  BREWERS'  ASSOCIATION. 

Percy  Andreas,  Chicago.  Gustav  Pabst,  Milwaukee,  Wis. 

Rudolf  Brand,  Chicago.  Charles  J.  Vopicka,  Chicago. 

E.  A.  Faust,  St.  Louis,  Mo. 

AMERICAN  EMBASSY  ASSOCIATION. 

E.  Clarence  Jones,  New  York  City. 
Frederick     Townsend     Martin,     New       Honorable     Frank     D.     Pavey,     New 
York  City.  York  City. 

NATIONAL  MERCHANT  MARINE  ASSOCIATION. 

James  L.   Ewell,  New  York  City. 

NATIONAL  FOUNDERS'  ASSOCIATION. 

O.    P.   Briggs,   Minneapolis,    Minn.  A.  E.  McClintock,  Detroit,  Mich. 

Otto   H.   Falk,   Milwaukee,   Wis.  Staunton   B.   Peck,  Chicago,  Ill._ 

F.  W.  Hutchings,  Detroit,  Mich.  Frederick  Ro])inson,  Racine,  Wis. 


326  NATIONAL     BUSINESS     CONGRESS 

THE    WHOLESALE    SADDLERY    ASSOCIATION    OF    THE    UNITED 

STATES. 

T.  F.  Hopkins,  Chicago.  R.    V-.    Rinehart.    Chicago. 

Albert  Kulilmey,  Chicago. 

AMERICAN  MANUFACTURERS'  EXPORT  ASSOCIATION. 

A.    E.   Ashburner,   Cleveland,    Ohio.  Leonard  S.  Smith,  Cincinnati,  Ohio. 

R.  W.  Ashcroft,   Racine,   Wis.  H.  J.  Turner,  Buffalo,  N.  Y. 

W.  B.  Campbell,  New  York  City.  Henry  T.  Wills,  New  York  City. 

Frederick  Glover,  Minneapolis,  Minn.       Spenser   S.  Weart,  Canton,  Ohio. 
G.  M.  Lingham,  Dayton,  Ohio.  P.   D.  Wright,  Erie,  Pa. 

William  C.   Redfield,  New  York  City. 

DETROIT  BOARD  OF  COMMERCE. 

George  11.   Barbour,  Detroit,   Mich.  Arthur  L.   Holmes,   Detroit,  Mich. 

Hon.   Edwin   Denby,  Detroit,  Mich. 

THE  CHICAGO  ASSOCIATION  OF  COMMERCE. 

William  H.  Bush,  Chicago.  George  Frederic  Stone,  Chicago. 

Frederick  A.  Delano,  Chicago.  Frederick   H.   Scott,  Chicago. 

Thomas  J.   Hyman,   Chicago.  G.  Kenneth  Sage,  Chicago. 

A.  W.  Holmes,  Chicago.  Irving  T.  Washington,  Chicago. 

Herman  H.  Kohlsaat,  Chicago. 

MONTPELIER  (VERMONT)  BOARD  OF  TRADE. 

Theron  F.  Colton,  Montpelier.  Marshall  L.  Wood,  Montpelier. 

James  S.  Haley,  Montpelier. 

NATCHEZ  (MISS.)  CHAMBER  OF  COMMERCE. 

C.  R.  Byrnes,  Natchez,  Miss.  S.  H.  Lowenburg,  Natchez,  Miss. 
Andrew  G.   Campbell,  Natchez,  Miss.       K.  Lehmann,  Natchez,  Miss. 

L.  E.  Davis,  Natchez,  Miss.  Judge  Van  Voorhees,   Natchez,  Miss. 

James  K.  Lambert,  Natchez,  Miss. 

THE  WILMINGTON  (DELAWARE)  BOARD  OF  TRADE. 

W.  Griscom  Coxe,  Wilmington,  Del.  Harvey  Holstein,  Wilmington,  Del. 

Charles     S.     Gawthrop,     V/ilmington,    Del. 

ILLINOIS  MANUFACTURERS'  ASSOCIATION. 

George     W.     Neidringhaus,  Granite       Charles  Piez,  Chicago,  111. 

City,  111.  Burton  ¥.  Peck,  Moline,  111. 

U.  G.  brendorff.  Canton,  111.  Thomas  J.  Hyman,  Chicago. 

P.   A.  Peterson,   Rockford,   111. 

WISCONSIN  BANKERS'  ASSOCIATION— MILWAUKEE. 

A.   Hirshheimer,  LaCrosse,  Wis.  George   D.   Bartlett,   Milwaukee,  Wis. 

Charles  C.  Brown,  Kenosha,  Wis. 

PEORIA  (ILL.)  ASSOCIATION  OF  COMMERCE. 

D.  H.  Bethard,  Peoria.  G.  W.  Perry,  Peoria. 

MERCHANTS'  AND  MANUFACTURERS'  ASSOCIATION   OF 

BALTIMORE. 

John  R.  Bland,  Baltimore,  Md.  James   AI.   Easter,   Baltimore,   Md. 

Walter   C.   Nimmo,    Baltimore,   Md.  Thomas  G.  Boggs,  Baltimore,  Md. 

Henry  B.  Wilcox,  Baltimore,  Md. 


NATIONAL     BUSINESS     CONGRESS  327 

BOARD  OF  TRADE  OF  THE  CITY  OF  CHICAGO. 

Z.  P.  Brosseau,  Chicago.  Walter  C.   Hately,  Chicago. 

W.  H.  Colvin,  Chicago.  A.   O.  Mason,  Chicago. 

Walter  Fitch,  Chicago. 

MANUFACTURERS'  AND  SHIPPERS'  ASSOCIATION  OF  ROCKFORD. 

C.   S.   Brantingham,  Rockford,  111. 
MANUFACTURERS'  ASSOCIATION   OF  KENOSHA. 

George  W.  Yule,  Kenosha,  Wis.  A.  H.  Lance,  Kenosha,  Wis. 

M.  F.  Yule,  Kenosha,  Wis. 

MERCHANTS'  AND  MANUFACTURERS'  ASSOCIATION   OF 
MILWAUKEE. 

W.  G.  Bruce,  Milwaukee,  Wis. 

THE  BOARD  OF  TRADE  OF  JERSEY  CITY. 

Austen  Colgate,  Jersey  City.  N.  J.  Robert  E.  Jennings,  New  York  City. 

THE  CITIZENS'  COMMERCIAL  ASSOCIATION  OF  FREEPORT. 

James  R.   Cowley,  Freeport,  111.  W.  C.  Jencks,  Freeport,  111. 

N.  F.  Cobb,  Freeport,  111. 

THE  CLINTON  MANUFACTURERS'  AND  SHIPPERS'  ASSOCIATION. 

G.  W.  Dulany,  Jr.,  Clinton,  Iowa. 
INDUSTRIAL  AND  COMMERCIAL  CLUB  OF  JANESVILLE. 

U.  L.  Carle,  Janesville,  Wis.  George  F.  Kimball,  Janesville,  Wis. 

J.  A.  Craig,  Janesville,  Wis.  Allen  P.  Lovejoy,  Janesville,  Wis. 

Azel  C.  Hough,  Janesville,  Wis. 

THE  CHAMBER  OF  COMMERCE  OF  NEW  HAVEN. 

Major    Louis    E.    Stoddard,     New  Colonel    I.    M.    Ullman,    New   Haven, 

Haven,  Conn.  Conn. 

John  T.  Manson,  New  Haven,  Conn. 

DULUTH  COMMERCIAL  CLUB. 

W.  M.  Prindle,  Duluth,  Minn. 

BOX  BOARD  MANUFACTURERS'  ASSOCIATION. 

Charles  R.  White,  Chicago. 

MANUFACTURERS'  ASSOCIATION  OF  RACINE. 

Steven  Bull,  2nd,  Racine,  Wis.  O.  W.  Johnson,  Racine,  Wis. 

Warren  J.  Davis,  Racine,  Wis.  W.  C.  McMahon,  Racine,  Wis. 

J.  W.  Gilson,  Racine,  Wis.  Frank  G.  Bolles,  Racine,  Wis. 

BUFFALO  (N.  Y.)   CHAMBER  OF  COMMERCE  AND  MANUFACTUR- 
ERS' CLUB. 

Jacob  C.  Bold,  Buffalo,  N.  Y. 


Commendatory  letters  were  received  from  business  organizations  all  over 
the  country,  promising  hearty  co-operation. 


328  NATIONAL     BUSINESS     CONGRESS 


Committees  of  the  National  Business  Congress 


GENERAL  COMMITTEE 


GEORGE  W.  SHELDON, 
Henry  C.  Lytton  John  W.  Kiser 

Charles  A.  Stevens  Charles  J.  Vopicka 

Rudolph  Ortmann  La  Verne  W.  Noyes 

Horace  E.  Horton  Mather  Smith 


Ward  W.  Willits 


Chairman 

Albert  B.  Dick 
Ellsworth  W.  McCullough 
Albert  E.  Ziehme 
William  P.  Ketcham 


Herman  H.  Hettler 


Louis  Mohr 


CREDENTIALS  COMMITTEE. 

A.  VOLNEY  FOSTER,  Chairman 

Noble  Crandall  Charles  J.  Stromberg 

Thomas  C.   Dennehy 

RESOLUTIONS  COMMITTEE. 

E.  ALLEN  FROST,  Chairman 


James  W.  Nye 


ENTERTAINMENT  COMMITTEE. 
FREDERICK  BODE,  Chairman 

Francis  T.  Simmons 
Harry  J.  Powers 


A.  Henry  Mulliken 


BANQUET 


James  H.  Hiland 
Fred  S.  James 


Edgar  A.  Bancroft 
Charles  F.  Gunther 


INVITATION  COMMITTEE 

PHILETUS  W.  GATES,  Chairman 

Alfred  L.  Baker 
Silas  J.  Llewellyn 


William  O.  Coleman 
Walter  Fitch 


BANQUET  COMMITTEE 
GEORGE  W.  DIXON,  Chairman 

Frederick    H.    Brennan       George  Lytton 
Elliott  Durand  G.  A.  Edward  Kohler 


RECEPTION  COMMITTEE 


Cyrus  H.  McCorm 
Samuel  Insull 
John  W.  Scott 
Bernard   E.  Sunny 
Homer  A.  Stilwell 
Charles  M.  Hewitt 
Orson  Smith 
Milton  W.  Kirk 
John  A.  Spoor 
Albert  J.  Earling 


GEORGE  M.  REYNOLDS, 
ick         Julius  Rosenwald 

Norman  W.  Harris 
James   B.   Forgan 
William  L.  Brown 
Laurence  A.  Carton 
Frederic  W.  Upham 
Charles   G.   Dawes 
Eugene  J.  Buffington 
Adolphus  C.  Bartlett 
Alexander  H.  Revell 


Chairman 

Harry  A.  Wheeler 
Clyde  M.  Carr 
Frederick  Bode 
James  W.  Nye 
Benjamin  J.  Rosenthal 
Charles  Piez 
Frederick  C.  Austin 
Henry  M.  Wallis 
Ulysses  G.  Orendorff 
William  H.  Stackhouse 


XC  VI 946 


28790 


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